- Retail stocks rallied on Monday, Oct. 22, despite dipping markets overall.
- Macy’s appears to be a stronger value buy at this point and offers a larger dividend.
- However, current growth projections might value The Gap moving forward.
Even as markets were falling Monday, retail stocks were on the rise with several major brick-and-mortar stores posting solid gains and the S&P Retail Select Index gaining 1.23 percent while the Dow and S&P 500 each lost about 0.4 to 0.5 percent. Two of those gainers were The Gap Inc. (GPS) and Macy’s Inc. (M), both of which have been declining in recent months.
If you’re thinking that this is the first sign that either or both of these retailers is ready to rebound, which retailer is the better investment?
Macy’s vs. The Gap Stock Comparison
Here’s a basic comparison of Macy’s and the Gap:
|Market Cap||$10.1 billion||$10.1 billion|
|Most Recent Annual Revenue||$24.8 billion||$15.9 billion|
|Most Recent Annual Profits||$1.5 billion||$848 million|
|Most Recent Annual Revenue Growth||-3.65%||2.18%|
|Most Recent Annual Profit Growth||149.92%||25.44%|
|GOBankingRates’ Net Worth Evaluation||$24 billion||$15.1 billion|
|Stock Gain/Loss Last Month||-7.85%||-5.08%|
|Stock Gain/Loss Last Year||62.98%||0.15%|
Why You Might Pick Macy’s:
- Macy’s edges out the Gap on its margins, with a profit margin of 6.66 percent to 5.43 percent for the Gap.
- Macy’s appears to be the stronger value buy at the moment, with a P/E ratio of 6.12 (11.47 for the Gap), P/S ratio of 0.4 (0.61 for the Gap) and P/B ratio of 1.71 (3.02 for the Gap).
- Macy’s has the better dividend yield at 4.67 percent, compared to 3.84 percent from the Gap.
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Why You Might Pick the Gap:
- The Gap’s growth prospects appear to be much stronger and come at a reasonable price with a PEG ratio of 0.81 while Macy’s posted its third-straight year of declining revenues in 2017.
- Market confidence in the Gap would appear to be higher if judged by the percentage of shares held by short sellers: 8.91 percent for the Gap to 15.35 percent for Macy’s, as of Sept. 27, 2018.
- The Gap offers a significantly better return on assets at 11.05 percent to just 5.55 percent for Macy’s.
The Final Word on M vs. GPS
Macy’s would appear to offer more — both from its lower price ratios and higher dividend yield — but the Gap could be on the stronger growth path based on its low PEG ratio.
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This article is produced for informational purposes only and is not a recommendation to buy or sell any securities. Investing comes with risk to loss of principal. Please always conduct your own research and consider your investment decisions carefully.