Critical Comparison: Urban Outfitters (URBN) & American Eagle Outfitters (NYSE:AEO)

Urban Outfitters (NASDAQ: URBN) and American Eagle Outfitters (NYSE:AEO) are both mid-cap apparel & accessories retailers – nec companies, but which is the superior stock? We will compare the two businesses based on the strength of their institutional ownership, analyst recommendations, dividends, profitability, valuation, risk and earnings.

Analyst Ratings

This is a summary of current ratings and target prices for Urban Outfitters and American Eagle Outfitters, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Urban Outfitters 3 17 7 0 2.15
American Eagle Outfitters 2 7 10 0 2.42

Urban Outfitters presently has a consensus price target of $22.43, indicating a potential downside of 10.08%. American Eagle Outfitters has a consensus price target of $14.76, indicating a potential upside of 6.59%. Given American Eagle Outfitters’ stronger consensus rating and higher probable upside, analysts clearly believe American Eagle Outfitters is more favorable than Urban Outfitters.

Dividends

American Eagle Outfitters pays an annual dividend of $0.50 per share and has a dividend yield of 3.6%. Urban Outfitters does not pay a dividend. American Eagle Outfitters pays out 51.5% of its earnings in the form of a dividend.

Valuation and Earnings

This table compares Urban Outfitters and American Eagle Outfitters’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Urban Outfitters $3.55 billion 0.78 $218.12 million $1.49 16.74
American Eagle Outfitters $3.61 billion 0.68 $212.44 million $0.97 14.28

Urban Outfitters has higher revenue, but lower earnings than American Eagle Outfitters. American Eagle Outfitters is trading at a lower price-to-earnings ratio than Urban Outfitters, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Urban Outfitters and American Eagle Outfitters’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Urban Outfitters 4.92% 13.61% 9.27%
American Eagle Outfitters 4.85% 18.25% 12.17%

Volatility & Risk

Urban Outfitters has a beta of 0.62, suggesting that its share price is 38% less volatile than the S&P 500. Comparatively, American Eagle Outfitters has a beta of 1.1, suggesting that its share price is 10% more volatile than the S&P 500.

Insider & Institutional Ownership

87.4% of Urban Outfitters shares are owned by institutional investors. Comparatively, 83.5% of American Eagle Outfitters shares are owned by institutional investors. 26.3% of Urban Outfitters shares are owned by company insiders. Comparatively, 5.9% of American Eagle Outfitters shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

About Urban Outfitters

Urban Outfitters, Inc. is a lifestyle specialty retail company. The Company operates through two segments: Retail and Wholesale. The Company’s Retail segment consists of its Urban Outfitters, Anthropologie, Free People, Terrain and Bhldn brands, whose merchandise is sold to its customers through retail stores, Websites, mobile applications, catalogs and customer contact centers. The Retail segment also includes Vetri Family, which operates restaurants under the names Amis, Alla Spina, Lo Spiedo, Pizzeria Vetri and Osteria. Its Wholesale segment consists of the Free People wholesale division that primarily designs, develops and markets young women’s contemporary casual apparel and shoes through individual and chain specialty stores and department stores. The Company’s Wholesale segment includes Free People-branded tops, bottoms, sweaters, dresses, intimates, shoes and activewear, which are sold through department and specialty stores around the world, and its Free People stores.

About American Eagle Outfitters

American Eagle Outfitters, Inc. (AEO Inc.) is a multi-brand specialty retailer. The Company offers a range of apparel and accessories for men and women under the American Eagle Outfitters Brand (AEO Brand), and intimates, apparel and personal care products for women under the Aerie brand. AEO Inc. operates stores in the United States, Canada, Mexico, Hong Kong, China and the United Kingdom. As of January 28, 2017, the Company operated over 1,000 retail stores and online at ae.com and aerie.com in the United States and internationally. Its company-owned retail stores are located in shopping malls, lifestyle centers and street locations in the United States, Canada, Mexico, China, Hong Kong and the United Kingdom. Its other brands include Tailgate and Todd Snyder New York. Tailgate is an apparel brand with a college town store concept. Todd Snyder New York is a menswear brand. As of January 28, 2017, the AEO brand operated 943 stores and online at www.ae.com.

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