Analyzing Abercrombie & Fitch (NYSE:ANF) and GAP (NYSE:GAP)

GAP (NYSE:GAP) and Abercrombie & Fitch (NYSE:ANF) are both mid-cap retail/wholesale companies, but which is the superior stock? We will compare the two businesses based on the strength of their valuation, institutional ownership, analyst recommendations, profitability, dividends, risk and earnings.

Earnings and Valuation

This table compares GAP and Abercrombie & Fitch”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
GAP	$15.17 billion	0.53	$502.00 million	$2.02	10.64
Abercrombie & Fitch	$4.28 billion	1.62	$328.12 million	$9.44	14.35

GAP has higher revenue and earnings than Abercrombie & Fitch. GAP is trading at a lower price-to-earnings ratio than Abercrombie & Fitch, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares GAP and Abercrombie & Fitch’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
GAP	5.05%	28.89%	6.92%
Abercrombie & Fitch	10.76%	47.35%	16.88%

Volatility and Risk

GAP has a beta of 2.35, indicating that its share price is 135% more volatile than the S&P 500. Comparatively, Abercrombie & Fitch has a beta of 1.5, indicating that its share price is 50% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings and price targets for GAP and Abercrombie & Fitch, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
GAP	0	3	1	0	2.25
Abercrombie & Fitch	0	3	4	0	2.57

GAP presently has a consensus target price of $27.33, suggesting a potential upside of 27.13%. Abercrombie & Fitch has a consensus target price of $176.71, suggesting a potential upside of 30.47%. Given Abercrombie & Fitch’s stronger consensus rating and higher probable upside, analysts clearly believe Abercrombie & Fitch is more favorable than GAP.

Insider and Institutional Ownership

58.8% of GAP shares are held by institutional investors. 31.0% of GAP shares are held by insiders. Comparatively, 2.6% of Abercrombie & Fitch shares are held by 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.

Summary

Abercrombie & Fitch beats GAP on 9 of the 14 factors compared between the two stocks.

About GAP

The Gap, Inc. operates as an apparel retail company. The company offers apparel, accessories, and personal care products for men, women, and children under the Old Navy, Gap, Banana Republic, and Athleta brands. Its products include adult apparel and accessories; and fitness and lifestyle products for use in yoga, training, sports, travel, and everyday activities for women and girls. The company offers its products through company-operated stores, franchise stores, websites, and third-party arrangements. It has franchise agreements to operate Old Navy, Gap, Banana Republic, and Athleta stores and websites in Asia, Europe, Latin America, the Middle East, and Africa. The Gap, Inc. was incorporated in 1969 and is headquartered in San Francisco, California.

About Abercrombie & Fitch

Abercrombie & Fitch Co., through its subsidiaries, operates as an omnichannel retailer in the United States, Europe, the Middle East, Asia, the Asia-Pacific, Canada, and internationally. The company offers an assortment of apparel, personal care products, and accessories for men, women, and kids under the Abercrombie & Fitch, abercrombie kids, Hollister, and Gilly Hicks brands. It sells products through its stores, various wholesale. franchise, and licensing arrangements, as well as e-commerce platforms. The company was founded in 1892 and is headquartered in New Albany, Ohio.