GAP (NYSE:GAP) vs. Buckle (NYSE:BKE) Critical Review

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

Risk and Volatility

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

Institutional and Insider Ownership

53.9% of Buckle shares are owned by institutional investors. Comparatively, 58.8% of GAP shares are owned by institutional investors. 39.8% of Buckle shares are owned by company insiders. Comparatively, 31.0% of GAP shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

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.

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%

Analyst Ratings

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

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

Earnings and Valuation

This table compares Buckle and GAP”s 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.

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.