Best Buy (NYSE:BBY) and American Eagle Outfitters (NYSE:AEO) Head to Head Survey

Best Buy (NYSE:BBY) 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 profitability, risk, institutional ownership, earnings, analyst recommendations, valuation and dividends.

Dividends

Best Buy pays an annual dividend of $3.84 per share and has a dividend yield of 4.2%. American Eagle Outfitters pays an annual dividend of $0.50 per share and has a dividend yield of 3.3%. Best Buy pays out 63.9% 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. Best Buy has increased its dividend for 22 consecutive years and American Eagle Outfitters has increased its dividend for 2 consecutive years. Best Buy is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Risk & Volatility

Best Buy has a beta of 1.28, meaning that its share price is 28% more volatile than the S&P 500. Comparatively, American Eagle Outfitters has a beta of 1.33, meaning that its share price is 33% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of current ratings for Best Buy and American Eagle Outfitters, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Best Buy	2	14	6	0	2.18
American Eagle Outfitters	1	11	2	1	2.20

Best Buy presently has a consensus price target of $85.40, indicating a potential downside of 6.04%. American Eagle Outfitters has a consensus price target of $19.36, indicating a potential upside of 28.70%. Given American Eagle Outfitters’ stronger consensus rating and higher possible upside, analysts clearly believe American Eagle Outfitters is more favorable than Best Buy.

Earnings and Valuation

This table compares Best Buy and American Eagle Outfitters”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Best Buy	$41.69 billion	0.46	$1.07 billion	$6.01	15.12
American Eagle Outfitters	$5.50 billion	0.46	$191.98 million	$1.96	7.68

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Best Buy	3.01%	48.14%	9.16%
American Eagle Outfitters	5.91%	23.63%	9.59%

Insider and Institutional Ownership

81.0% of Best Buy shares are held by institutional investors. Comparatively, 97.3% of American Eagle Outfitters shares are held by institutional investors. 0.5% of Best Buy shares are held by insiders. Comparatively, 8.9% of American Eagle Outfitters shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Summary

American Eagle Outfitters beats Best Buy on 10 of the 18 factors compared between the two stocks.

About Best Buy

Best Buy Co., Inc. engages in the retail of technology products in the United States, Canada, and international. Its stores provide computing and mobile phone products, such as desktops, notebooks, and peripherals; mobile phones comprising related mobile network carrier commissions; networking products; tablets covering e-readers; smartwatches; and consumer electronics consisting of digital imaging, health and fitness products, portable audio comprising headphones and portable speakers, and smart home products, as well as home theaters, which includes home theater accessories, soundbars, and televisions. The company's stores also offer appliances, such as dishwashers, laundry, ovens, refrigerators, blenders, coffee makers, vacuums, and personal care; entertainment products consisting of drones, peripherals, movies, and toys, as well as hardware and software, and virtual reality and other software products; and other products, such as baby, food and beverage, luggage, outdoor living, and sporting goods. In addition, it provides delivery, installation, memberships, repair, set-up, technical support, health-related, and warranty-related services. The company offers its products through stores and websites under the Best Buy, Best Buy Ads, Best Buy Business, Best Buy Health, Buy Mobile, CST, Current Health, Geek Squad, Lively, Magnolia, Pacific Kitchen, Home, TechLiquidators, and Yardbird brands, as well as domain names comprising bestbuy.com, currenthealth.com, lively.com, techliquidators.com, yardbird.com, and bestbuy.ca. The company was formerly known as Sound of Music, Inc. Best Buy Co., Inc. was incorporated in 1966 and is headquartered in Richfield, Minnesota.

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.