Critical Review: GAP (NYSE:GAP) and ON (NYSE:ONON)

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

Institutional & Insider Ownership

58.8% of GAP shares are held by institutional investors. Comparatively, 36.4% of ON shares are held by institutional investors. 31.0% of GAP shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for GAP and ON, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
GAP	0	3	13	2	2.94
ON	2	3	18	3	2.85

GAP currently has a consensus price target of $29.93, suggesting a potential upside of 11.92%. ON has a consensus price target of $60.59, suggesting a potential upside of 34.26%. Given ON’s higher possible upside, analysts plainly believe ON is more favorable than GAP.

Risk and Volatility

GAP has a beta of 2.31, suggesting that its stock price is 131% more volatile than the S&P 500. Comparatively, ON has a beta of 2.15, suggesting that its stock price is 115% more volatile than the S&P 500.

Valuation & Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
GAP	$15.09 billion	0.66	$844.00 million	$2.24	11.94
ON	$2.63 billion	10.76	$275.23 million	$0.77	58.61

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
GAP	5.57%	24.91%	7.10%
ON	7.45%	14.81%	8.48%

Summary

GAP beats ON on 8 of the 15 factors compared between the two stocks.

About GAP

Gap, Inc. operates as a global apparel retail company, which offers clothing, apparel, accessories, and personal care products for men, women, and children. The firm operates through the following segments: Gap Global, Old Navy Global, Banana Republic Global, Athleta, and Other. The Gap Global segment includes apparel and accessories for men and women under the Gap brand, along with the GapKids, BabyGap, GapMaternity, GapBody, and GapFit collections. The Old Navy Global segment offers clothing and accessories for adults and children. The Banana Republic Global segment provides clothing, eyewear, jewelry, shoes, handbags, and fragrances. The Athleta segment offers fitness apparel for women. The company founded by Donald G. Fisher and Doris F. Fisher in July 1969 and is headquartered in San Francisco, CA.

About ON

On Holding AG engages in the development and distribution of sports products such as footwear, apparel, and accessories for high-performance running, outdoor, all-day activities, and tennis. It sells its products worldwide through independent retailers and global distributors, its own online presence, and its own stores. The company was founded by David Allemann, Olivier Bernhard, and Caspar Coppetti in January 2010 and is headquartered in Zurich, Switzerland.