Critical Review: Stage Stores (SSI) and American Eagle Outfitters (AEO)

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

Institutional & Insider Ownership

52.9% of Stage Stores shares are held by institutional investors. Comparatively, 83.2% of American Eagle Outfitters shares are held by institutional investors. 7.4% of Stage Stores shares are held by company insiders. Comparatively, 5.9% of American Eagle Outfitters shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Volatility & Risk

Stage Stores has a beta of 1.35, meaning that its share price is 35% more volatile than the S&P 500. Comparatively, American Eagle Outfitters has a beta of 1.14, meaning that its share price is 14% more volatile than the S&P 500.

Analyst Ratings

This is a summary of recent recommendations and price targets for Stage Stores and American Eagle Outfitters, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Stage Stores 1 1 0 0 1.50
American Eagle Outfitters 1 6 9 0 2.50

Stage Stores presently has a consensus price target of $1.00, indicating a potential downside of 42.86%. American Eagle Outfitters has a consensus price target of $16.25, indicating a potential downside of 8.19%. Given American Eagle Outfitters’ stronger consensus rating and higher possible upside, analysts plainly believe American Eagle Outfitters is more favorable than Stage Stores.

Profitability

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

Net Margins Return on Equity Return on Assets
Stage Stores -3.33% -8.67% -3.56%
American Eagle Outfitters 4.50% 17.42% 11.63%

Dividends

Stage Stores pays an annual dividend of $0.20 per share and has a dividend yield of 11.4%. American Eagle Outfitters pays an annual dividend of $0.50 per share and has a dividend yield of 2.8%. Stage Stores pays out -11.0% of its earnings in the form of a dividend. American Eagle Outfitters pays out 54.3% 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. Stage Stores is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings & Valuation

This table compares Stage Stores and American Eagle Outfitters’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Stage Stores $1.44 billion 0.03 -$37.89 million ($1.82) -0.96
American Eagle Outfitters $3.61 billion 0.87 $212.44 million $0.92 19.24

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

Summary

American Eagle Outfitters beats Stage Stores on 11 of the 15 factors compared between the two stocks.

About Stage Stores

Stage Stores, Inc. operates specialty department stores mainly in small and mid-sized towns and communities. The Company’s department stores offer a range of brand name and private label apparel, accessories, cosmetics, footwear and home goods. The Company operates approximately 830 specialty department stores in over 40 states under the BEALLS, GOODY’S, PALAIS ROYAL, PEEBLES and STAGE nameplates and a direct-to-consumer business. The Company’s direct-to-consumer business consists of its e-commerce Website and Send program. The Company’s e-commerce Website includes a range of merchandise categories found in its stores, as well as other product offerings. The Company’s in-store Send program allows customers to have merchandise shipped directly to their homes if the preferred size or color is not available in their local store. The Company’s private label portfolio brands are developed and sourced through agreements with third-party vendors.

About American Eagle Outfitters

American Eagle Outfitters, Inc. (AEO Inc.) is a multi-brand specialty retailer. The Company offers a range of apparel and accessories for men and women under the American Eagle Outfitters Brand (AEO Brand), and intimates, apparel and personal care products for women under the Aerie brand. AEO Inc. operates stores in the United States, Canada, Mexico, Hong Kong, China and the United Kingdom. As of January 28, 2017, the Company operated over 1,000 retail stores and online at ae.com and aerie.com in the United States and internationally. Its company-owned retail stores are located in shopping malls, lifestyle centers and street locations in the United States, Canada, Mexico, China, Hong Kong and the United Kingdom. Its other brands include Tailgate and Todd Snyder New York. Tailgate is an apparel brand with a college town store concept. Todd Snyder New York is a menswear brand. As of January 28, 2017, the AEO brand operated 943 stores and online at www.ae.com.

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