Critical Comparison: Citi Trends (CTRN) & Carter's (NYSE:CRI)

Citi Trends (NASDAQ: CTRN) and Carter's (NYSE:CRI) are both retail/wholesale companies, but which is the better stock? We will compare the two businesses based on the strength of their earnings, institutional ownership, dividends, valuation, analyst recommendations, profitability and risk.

Profitability

This table compares Citi Trends and Carter's’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Citi Trends 2.04% 7.70% 5.14%
Carter's 7.69% 33.38% 12.91%

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for Citi Trends and Carter's, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Citi Trends 0 0 0 0 N/A
Carter's 0 4 9 0 2.69

Carter's has a consensus target price of $110.92, suggesting a potential downside of 7.81%. Given Carter's’ higher possible upside, analysts clearly believe Carter's is more favorable than Citi Trends.

Dividends

Citi Trends pays an annual dividend of $0.32 per share and has a dividend yield of 1.4%. Carter's pays an annual dividend of $1.48 per share and has a dividend yield of 1.2%. Citi Trends pays out 31.4% of its earnings in the form of a dividend. Carter's pays out 28.5% 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. Citi Trends has increased its dividend for 4 consecutive years. Citi Trends is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider and Institutional Ownership

87.3% of Citi Trends shares are held by institutional investors. Comparatively, 99.4% of Carter's shares are held by institutional investors. 4.6% of Citi Trends shares are held by insiders. Comparatively, 3.1% of Carter's 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.

Volatility and Risk

Citi Trends has a beta of 0.44, indicating that its share price is 56% less volatile than the S&P 500. Comparatively, Carter's has a beta of 0.32, indicating that its share price is 68% less volatile than the S&P 500.

Valuation & Earnings

This table compares Citi Trends and Carter's’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Citi Trends $695.17 million 0.45 $13.33 million $1.02 22.16
Carter's $3.20 billion 1.78 $258.10 million $5.19 23.18

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

Summary

Carter's beats Citi Trends on 12 of the 16 factors compared between the two stocks.

Citi Trends Company Profile

Citi Trends, Inc. is a retailer of urban fashion apparel and accessories. The Company’s segment is retail operations. The Company operates approximately 520 stores in both urban and rural markets in over 30 states. The Company offers products under its brands, such as Citi Steps and Red Ape. The Company’s merchandise includes apparel, accessories and home. Within apparel, the Company offers fashion sportswear for men, women and children, including offerings for newborns, infants, toddlers, boys and girls. Accessories include handbags, jewelry, footwear, belts, intimate apparel, scrubs and sleepwear. The Company’s home merchandise includes decorative home product, functional home product, beauty, books, toys and electronic accessories. The Company sources its merchandise from approximately 1,700 vendors, consisting of domestic manufacturers and importers.

Carter's Company Profile

Carter’s, Inc. (Carter’s) is a marketer of apparel for babies and young children in the United States and Canada. The Company owns two brand names in the children’s apparel industry, Carter’s and OshKosh B’gosh (OshKosh). The Company operates through five segments: Carter’s Retail, Carter’s Wholesale, OshKosh Retail, OshKosh Wholesale and International. Its International segment includes company-operated retail stores and online Websites, wholesale operations, and royalty income from its international licensees. It markets products for consumers, and offer various product categories, including baby, sleepwear, play clothes, and related accessories. Its multi-channel international business model – retail stores, online and wholesale – enables it to reach a range of consumers around the world. As of December 31, 2016, its channels included approximately 18,000 wholesale locations, 792 stores in the United States, 164 stores in Canada, and its Canadian and the United States Websites.

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