Financial Survey: American Eagle Outfitters (NYSE:AEO) versus Best Buy (NYSE:BBY)

American Eagle Outfitters (NYSE:AEO) and Best Buy (NYSE:BBY) are both consumer discretionary 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.

Institutional and Insider Ownership

97.3% of American Eagle Outfitters shares are held by institutional investors. Comparatively, 81.0% of Best Buy shares are held by institutional investors. 8.9% of American Eagle Outfitters shares are held by insiders. Comparatively, 0.5% of Best Buy 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.

Dividends

American Eagle Outfitters pays an annual dividend of $0.50 per share and has a dividend yield of 2.9%. Best Buy pays an annual dividend of $3.84 per share and has a dividend yield of 4.3%. American Eagle Outfitters pays out 30.9% of its earnings in the form of a dividend. Best Buy pays out 63.9% 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. American Eagle Outfitters has increased its dividend for 2 consecutive years and Best Buy has increased its dividend for 22 consecutive years. Best Buy is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares American Eagle Outfitters and Best Buy’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
American Eagle Outfitters	5.01%	20.95%	8.34%
Best Buy	3.01%	48.14%	9.16%

Earnings and Valuation

This table compares American Eagle Outfitters and Best Buy”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
American Eagle Outfitters	$5.65 billion	0.51	$191.98 million	$1.62	10.56
Best Buy	$42.20 billion	0.44	$1.07 billion	$6.01	14.77

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

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for American Eagle Outfitters and Best Buy, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
American Eagle Outfitters	1	12	2	0	2.07
Best Buy	2	14	6	0	2.18

American Eagle Outfitters currently has a consensus price target of $20.18, suggesting a potential upside of 17.99%. Best Buy has a consensus price target of $85.40, suggesting a potential downside of 3.78%. Given American Eagle Outfitters’ higher probable upside, analysts plainly believe American Eagle Outfitters is more favorable than Best Buy.

Volatility & Risk

American Eagle Outfitters has a beta of 1.33, indicating that its stock price is 33% more volatile than the S&P 500. Comparatively, Best Buy has a beta of 1.28, indicating that its stock price is 28% more volatile than the S&P 500.

Summary

Best Buy beats American Eagle Outfitters on 10 of the 17 factors compared between the two stocks.

About American Eagle Outfitters

American Eagle Outfitters, Inc. operates as a multi-brand specialty retailer in the United States and internationally. The company provides jeans, apparel and accessories, and personal care products for women and men under the American Eagle brand; and intimates, apparel, activewear, and swim collections under the Aerie and OFFLINE by Aerie brands. It also offers menswear products under the Todd Snyder New York brand; and fashion clothing and accessories under the Unsubscribed brand. The company sells its products through own and licensed retail stores; concession-based shops-within-shops; and digital channels, such as www.ae.com, www.aerie.com, www.toddsnyder.com, and www.unsubscribed.com. American Eagle Outfitters, Inc. was founded in 1977 and is headquartered in Pittsburgh, Pennsylvania.

About Best Buy

Best Buy Co., Inc. engages in the retail of technology products in the United States, Canada, and international. Its stores provide computing and mobile phone products, such as desktops, notebooks, and peripherals; mobile phones comprising related mobile network carrier commissions; networking products; tablets covering e-readers; smartwatches; and consumer electronics consisting of digital imaging, health and fitness products, portable audio comprising headphones and portable speakers, and smart home products, as well as home theaters, which includes home theater accessories, soundbars, and televisions. The company's stores also offer appliances, such as dishwashers, laundry, ovens, refrigerators, blenders, coffee makers, vacuums, and personal care; entertainment products consisting of drones, peripherals, movies, and toys, as well as hardware and software, and virtual reality and other software products; and other products, such as baby, food and beverage, luggage, outdoor living, and sporting goods. In addition, it provides delivery, installation, memberships, repair, set-up, technical support, health-related, and warranty-related services. The company offers its products through stores and websites under the Best Buy, Best Buy Ads, Best Buy Business, Best Buy Health, Buy Mobile, CST, Current Health, Geek Squad, Lively, Magnolia, Pacific Kitchen, Home, TechLiquidators, and Yardbird brands, as well as domain names comprising bestbuy.com, currenthealth.com, lively.com, techliquidators.com, yardbird.com, and bestbuy.ca. The company was formerly known as Sound of Music, Inc. Best Buy Co., Inc. was incorporated in 1966 and is headquartered in Richfield, Minnesota.