Financial Analysis: Hennes & Mauritz (OTCMKTS:HNNMY) versus American Eagle Outfitters (NYSE:AEO)

Hennes & Mauritz (OTCMKTS:HNNMY) and American Eagle Outfitters (NYSE:AEO) are both consumer discretionary companies, but which is the better investment? We will compare the two businesses based on the strength of their dividends, profitability, valuation, analyst recommendations, earnings, risk and institutional ownership.

Risk and Volatility

Hennes & Mauritz has a beta of 1.2, indicating that its share price is 20% more volatile than the S&P 500. Comparatively, American Eagle Outfitters has a beta of 1.34, indicating that its share price is 34% more volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Hennes & Mauritz	5.94%	33.70%	7.80%
American Eagle Outfitters	5.91%	23.63%	9.59%

Insider & Institutional Ownership

0.0% of Hennes & Mauritz shares are held by institutional investors. Comparatively, 97.3% of American Eagle Outfitters shares are held by institutional investors. 8.9% of American Eagle Outfitters shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Dividends

Hennes & Mauritz pays an annual dividend of $0.07 per share and has a dividend yield of 2.0%. American Eagle Outfitters pays an annual dividend of $0.50 per share and has a dividend yield of 2.5%. Hennes & Mauritz pays out 41.2% of its earnings in the form of a dividend. American Eagle Outfitters pays out 25.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. American Eagle Outfitters has increased its dividend for 2 consecutive years. American Eagle Outfitters is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation and Earnings

This table compares Hennes & Mauritz and American Eagle Outfitters”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Hennes & Mauritz	$23.01 billion	1.08	$1.23 billion	$0.17	20.82
American Eagle Outfitters	$5.50 billion	0.61	$191.98 million	$1.96	10.17

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

Analyst Ratings

This is a summary of recent ratings for Hennes & Mauritz and American Eagle Outfitters, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Hennes & Mauritz	3	4	0	0	1.57
American Eagle Outfitters	1	12	2	0	2.07

American Eagle Outfitters has a consensus price target of $19.55, suggesting a potential downside of 1.92%. Given American Eagle Outfitters’ stronger consensus rating and higher probable upside, analysts clearly believe American Eagle Outfitters is more favorable than Hennes & Mauritz.

Summary

American Eagle Outfitters beats Hennes & Mauritz on 11 of the 17 factors compared between the two stocks.

About Hennes & Mauritz

H & M Hennes & Mauritz AB (publ) provides clothing, accessories, footwear, cosmetics, home textiles, and homeware for women, men, and children worldwide. It offers sportswear, shoes, bags, beauty products, activewear, jeans, and ready-to-wear; and interior products, including bed linens, dinnerware, textiles, furniture, and lighting. The company provides its products under the H&M, H&M HOME, H&M Move, H&M Beauty, COS, Weekday, Monki, & Other Stories, ARKET, Afound, and Singular Society brand names. In addition, it operates Sellpy, a broad digital platform for second-hand fashion and other products; and Creator Studio, a global platform for merchandise design and production, as well as provides solutions to extend the useful life of unwanted garments through reuse and recycling under Looper Textile name. The company offers its products through online and physical stores. H & M Hennes & Mauritz AB (publ) was incorporated in 1943 and is headquartered in Stockholm, Sweden.

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.