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

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

Risk & Volatility

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

Insider and Institutional Ownership

58.8% of GAP shares are owned by institutional investors. 2.6% of Abercrombie & Fitch shares are owned by insiders. Comparatively, 31.0% of GAP shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Valuation and Earnings

This table compares Abercrombie & Fitch and GAP”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Abercrombie & Fitch	$4.28 billion	1.72	$328.12 million	$9.44	15.25
GAP	$14.89 billion	0.55	$502.00 million	$2.02	10.73

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

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

Analyst Ratings

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

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

Abercrombie & Fitch presently has a consensus target price of $176.71, suggesting a potential upside of 22.74%. GAP has a consensus target price of $27.33, suggesting a potential upside of 26.13%. Given GAP’s higher possible upside, analysts clearly believe GAP is more favorable than Abercrombie & Fitch.

Summary

Abercrombie & Fitch beats GAP on 8 of the 14 factors compared between the two stocks.

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.

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.