Critical Review: Buckle (NYSE:BKE) versus GAP (NYSE:GAP)

Buckle (NYSE:BKE) and GAP (NYSE:GAP) are both mid-cap retail/wholesale companies, but which is the better stock? We will contrast the two companies based on the strength of their analyst recommendations, profitability, institutional ownership, risk, dividends, valuation and earnings.

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for Buckle and GAP, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Buckle	0	1	0	0	2.00
GAP	1	4	6	0	2.45

Buckle currently has a consensus price target of $46.00, suggesting a potential downside of 10.61%. GAP has a consensus price target of $28.50, suggesting a potential upside of 17.87%. Given GAP’s stronger consensus rating and higher probable upside, analysts plainly believe GAP is more favorable than Buckle.

Volatility & Risk

Buckle has a beta of 1.14, indicating that its stock price is 14% more volatile than the S&P 500. Comparatively, GAP has a beta of 2.37, indicating that its stock price is 137% more volatile than the S&P 500.

Institutional and Insider Ownership

53.9% of Buckle shares are held by institutional investors. Comparatively, 58.8% of GAP shares are held by institutional investors. 39.8% of Buckle shares are held by insiders. Comparatively, 31.0% of GAP shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Earnings & Valuation

This table compares Buckle and GAP”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Buckle	$1.22 billion	2.14	$219.92 million	$3.94	13.06
GAP	$15.24 billion	0.60	$502.00 million	$2.16	11.19

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

Profitability

This table compares Buckle and GAP’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Buckle	16.21%	44.11%	21.32%
GAP	5.40%	29.03%	7.26%

Dividends

Buckle pays an annual dividend of $1.40 per share and has a dividend yield of 2.7%. GAP pays an annual dividend of $0.60 per share and has a dividend yield of 2.5%. Buckle pays out 35.5% of its earnings in the form of a dividend. GAP pays out 27.8% 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.

About Buckle

The Buckle, Inc. operates as a retailer of casual apparel, footwear, and accessories for young men and women in the United States. It markets a selection of brand name casual apparel, including denims, other casual bottoms, tops, sportswear, outerwear, accessories, and footwear, as well as private label merchandise primarily comprising BKE, Buckle Black, Salvage, Red by BKE, Daytrip, Gimmicks, Gilded Intent, FITZ + EDDI, Willow & Root, Outpost Makers, Departwest, Sterling & Stitch, Reclaim, BKE Vintage, Nova Industries, J.B. Holt, Modish Rebel, Maven Co-op, and Veece. The company provides services, such as hemming, gift-packaging, layaways, guest loyalty program, the Buckle private label credit card, and personalized stylist services, as well as special order system that allows stores to obtain requested merchandise from other company stores or its online order fulfillment center. The Buckle, Inc. also sells its products through its website, buckle.com. The company was formerly known as Mills Clothing, Inc. and changed its name to The Buckle, Inc. in April 1991.The Buckle, Inc. was incorporated in 1948 and is headquartered in Kearney, Nebraska.

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.