Financial Survey: American Eagle Outfitters (NYSE:AEO) vs. Tapestry (NYSE:TPR)

American Eagle Outfitters (NYSE:AEO) and Tapestry (NYSE:TPR) are both retail/wholesale companies, but which is the superior business? We will contrast the two businesses based on the strength of their institutional ownership, analyst recommendations, earnings, valuation, profitability, risk and dividends.

Insider & Institutional Ownership

97.3% of American Eagle Outfitters shares are held by institutional investors. Comparatively, 90.8% of Tapestry shares are held by institutional investors. 8.7% of American Eagle Outfitters shares are held by company insiders. Comparatively, 1.3% of Tapestry shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Analyst Ratings

This is a breakdown of current ratings and price targets for American Eagle Outfitters and Tapestry, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
American Eagle Outfitters	3	10	1	0	1.86
Tapestry	0	5	18	0	2.78

American Eagle Outfitters currently has a consensus price target of $14.72, suggesting a potential downside of 7.15%. Tapestry has a consensus price target of $110.00, suggesting a potential downside of 5.42%. Given Tapestry’s stronger consensus rating and higher possible upside, analysts plainly believe Tapestry is more favorable than American Eagle Outfitters.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
American Eagle Outfitters	3.74%	13.67%	5.80%
Tapestry	2.61%	68.02%	13.01%

Earnings & Valuation

This table compares American Eagle Outfitters and Tapestry”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
American Eagle Outfitters	$5.33 billion	0.50	$329.38 million	$1.04	15.25
Tapestry	$7.01 billion	3.43	$183.20 million	$0.63	184.61

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

Volatility and Risk

American Eagle Outfitters has a beta of 1.6, meaning that its stock price is 60% more volatile than the S&P 500. Comparatively, Tapestry has a beta of 1.57, meaning that its stock price is 57% more volatile than the S&P 500.

Dividends

American Eagle Outfitters pays an annual dividend of $0.50 per share and has a dividend yield of 3.2%. Tapestry pays an annual dividend of $1.60 per share and has a dividend yield of 1.4%. American Eagle Outfitters pays out 48.1% of its earnings in the form of a dividend. Tapestry pays out 254.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. American Eagle Outfitters has raised its dividend for 2 consecutive years and Tapestry has raised its dividend for 3 consecutive years. American Eagle Outfitters is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Tapestry beats American Eagle Outfitters on 9 of the 17 factors compared between the two stocks.

About American Eagle Outfitters

American Eagle Outfitters, Inc. operates as a multi-brand specialty retailer in the United States and internationally. The company provides jeans, apparel and accessories, and personal care products for women and men under the American Eagle brand; and intimates, apparel, activewear, and swim collections under the Aerie and OFFLINE by Aerie brands. It also offers menswear products under the Todd Snyder New York brand; and fashion clothing and accessories under the Unsubscribed brand. The company sells its products through own and licensed retail stores; concession-based shops-within-shops; and digital channels, such as www.ae.com, www.aerie.com, www.toddsnyder.com, and www.unsubscribed.com. American Eagle Outfitters, Inc. was founded in 1977 and is headquartered in Pittsburgh, Pennsylvania.

About Tapestry

Tapestry, Inc. provides luxury accessories and branded lifestyle products in the United States, Japan, Greater China, and internationally. The company operates in three segments: Coach, Kate Spade, and Stuart Weitzman. It offers women’s handbags; and women’s accessories, such as small leather goods which includes mini and micro handbags, money pieces, wristlets, pouches, and cosmetic cases, as well as novelty accessories including address books, time management and travel accessories, sketchbooks, and portfolios; and belts, key rings, and charms. The company also provides men products, which includes bag collections, such as business cases, computer bags, messenger-style bags, backpacks, and totes; small leather goods including wallets, card cases, travel organizers, and belts; and footwear, watches, fragrances, sunglasses, novelty accessories, and ready-to-wear items. In addition, it offers other products including women’s footwear and fragrances; eyewear and sunglasses; and jewelry, such as bracelets, necklaces, rings, and earrings, watches, and other women’s seasonal lifestyle apparel collections, including outerwear, ready-to-wear and cold weather accessories, such as gloves, scarves, and hats. Further, the company provides kids items, housewares, and home accessories, such as fashion bedding and tableware, stationery, and gifts. It offers its products through e-commerce sites and concession shop-in-shops, wholesale, and third-party distributors under the Coach, Kate Spade, and Stuart Weitzman brand names. The company was formerly known as Coach, Inc. and changed its name to Tapestry, Inc. in October 2017. Tapestry, Inc. was founded in 1941 and is headquartered in New York, New York.