Carter’s (CRI) and XCel Brands (NASDAQ:XELB) Critical Review

XCel Brands (NASDAQ: XELB) and Carter’s (NYSE:CRI) are both retail/wholesale companies, but which is the superior investment? We will compare the two companies based on the strength of their valuation, profitability, dividends, analyst recommendations, earnings, institutional ownership and risk.

Analyst Ratings

This is a summary of recent ratings and recommmendations for XCel Brands and Carter’s, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
XCel Brands 0 0 3 0 3.00
Carter’s 0 4 9 0 2.69

XCel Brands currently has a consensus target price of $4.67, suggesting a potential upside of 79.49%. Carter’s has a consensus target price of $119.83, suggesting a potential upside of 14.13%. Given XCel Brands’ stronger consensus rating and higher probable upside, analysts plainly believe XCel Brands is more favorable than Carter’s.

Institutional & Insider Ownership

21.6% of XCel Brands shares are owned by institutional investors. Comparatively, 97.5% of Carter’s shares are owned by institutional investors. 59.9% of XCel Brands shares are owned by insiders. Comparatively, 3.1% of Carter’s shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Volatility and Risk

XCel Brands has a beta of 0.53, meaning that its stock price is 47% less volatile than the S&P 500. Comparatively, Carter’s has a beta of 0.44, meaning that its stock price is 56% less volatile than the S&P 500.

Valuation and Earnings

This table compares XCel Brands and Carter’s’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
XCel Brands $31.71 million 1.51 -$10.12 million $0.09 28.89
Carter’s $3.40 billion 1.45 $302.76 million $5.76 18.23

Carter’s has higher revenue and earnings than XCel Brands. Carter’s is trading at a lower price-to-earnings ratio than XCel Brands, indicating that it is currently the more affordable of the two stocks.

Dividends

Carter’s pays an annual dividend of $1.80 per share and has a dividend yield of 1.7%. XCel Brands does not pay a dividend. Carter’s pays out 31.3% of its earnings in the form of a dividend. Carter’s has raised its dividend for 4 consecutive years.

Profitability

This table compares XCel Brands and Carter’s’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
XCel Brands -31.92% 2.93% 2.13%
Carter’s 8.90% 35.46% 13.81%

Summary

Carter’s beats XCel Brands on 10 of the 17 factors compared between the two stocks.

XCel Brands Company Profile

Xcel Brands, Inc., together with its subsidiaries, operates as a media and brand management company in the United States. The company designs, produces, licenses, markets, and sells branded apparel, footwear, accessories, jewelry, home goods, and other consumer products; and acquires consumer lifestyle brands, including the Isaac Mizrahi brands, the Judith Ripka brands, the H Halston brands, the C Wonder brand, and the Highline Collective brand, as well as manages and designs the Liz Claiborne New York brand. It licenses its brands to third parties; and provides design, production, and marketing services to wholesale manufacturers, sourcing and design companies, and retailers for promotion and distribution through a ubiquitous-channel retail sales strategy, including distribution through interactive television, the Internet, and traditional brick-and-mortar retail channels. The company also offers marketing, advertising, public relations, and social media marketing campaigns for its brands. In addition, it markets the Mizrahi brands through isaacmizrahi.com; the Ripka brands through judithripka.com; and the C Wonder brands through cwonder.com. Xcel Brands, Inc. is headquartered in New York, New York.

Carter’s Company Profile

Carter's, Inc., together with its subsidiaries, designs, sources, and markets branded childrenswear under the Carter's, Child of Mine, Just One You, Precious Firsts, Simple Joys, OshKosh, Skip Hop, and other brands. The company operates through three segments: U.S. Retail, U.S. Wholesale, and International. Its Carter's products include baby products, such as bodysuits, pants, dresses, multi-piece sets, blankets, layette essentials, bibs, and booties; play clothes products comprising knit and woven cotton apparel; sleepwear products consisting of pajamas in cotton, fleece, and ploy-jersey; and other products, including bedding, outerwear, swimwear, footwear, socks, diaper bags, gift sets, toys, jewelry, cribs, paper goods, and hair accessories. The company's OshKosh brand products comprise playclothes products that include denim, overalls, woven bottoms, knit tops, bodysuits, and other playclothes for sizes newborn to 14. It also offers baby, sleepwear, outerwear, footwear, hosiery, and accessories under the OshKosh brand. The company distributes its products through department stores, chain and specialty stores, and discount retailers, as well as company-operated stores, and Websites. As of December 30, 2017, it operated 466 Carter's and 131 OshKosh stand-alone stores in the United States; 159 side-by-side and 74 co-branded stores in the United States; and 179 co-branded stores in Canada. The company was founded in 1865 and is headquartered in Atlanta, Georgia.

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