Investors are closely examining the prospects of two prominent retail companies, Bath & Body Works (NYSE: BBWI) and Tractor Supply (NASDAQ: TSCO). This article contrasts the two businesses based on profitability, dividends, institutional ownership, earnings, analyst recommendations, risk, and valuation to determine which represents the better investment option.
Institutional Ownership and Insider Activity
Institutional ownership plays a significant role in understanding investor confidence. Currently, a substantial 95.1% of Bath & Body Works shares are held by institutional investors, while an even higher 98.7% of Tractor Supply shares are owned by this category of investors. Insider ownership is relatively low for both companies, with 0.3% of Bath & Body Works shares and 0.7% of Tractor Supply shares owned by company insiders. High institutional ownership often signals that large funds believe a stock is poised for growth.
Profitability Metrics
Profitability is a vital consideration for investors. The net margins, return on equity, and return on assets provide insight into each company’s financial health. Bath & Body Works boasts a net margin of 9.88% and an impressive return on equity of -48.43%, coupled with a return on assets of 15.18%. In contrast, Tractor Supply shows a net margin of 7.18%, a return on equity of 46.18%, and a return on assets of 10.62%. These figures suggest that while Bath & Body Works has a more favorable net margin, Tractor Supply excels in return on equity.
Valuation and Earnings Comparison
When evaluating revenue and earnings, Tractor Supply outperforms Bath & Body Works. The former reports a gross revenue of $15.40 billion and a net income of $1.10 billion, resulting in an earnings per share (EPS) of $2.08 and a price-to-earnings (P/E) ratio of 26.34. Bath & Body Works, on the other hand, generates $7.35 billion in revenue and $798 million in net income, with an EPS of $3.25 and a lower P/E ratio of 5.38. This lower P/E ratio indicates that Bath & Body Works may be the more affordable option at present.
Analysts have provided insights into their expectations for both companies. Bath & Body Works holds a consensus target price of $25.17, suggesting a potential upside of 43.81%. In contrast, Tractor Supply has a target price of $63.95, indicating a potential upside of 16.74%. The higher potential for Bath & Body Works suggests a more favorable outlook among analysts.
Dividend Analysis
Dividends are an important aspect of investment returns. Bath & Body Works currently pays an annual dividend of $0.80 per share, yielding 4.6%. Tractor Supply offers a slightly higher dividend at $0.92 per share, resulting in a yield of 1.7%. Notably, Bath & Body Works has a lower payout ratio of 24.6% compared to Tractor Supply’s 44.2%. Both companies maintain healthy payout ratios, but Bath & Body Works stands out as the stronger dividend stock due to its higher yield and lower payout ratio. Furthermore, Tractor Supply has consistently raised its dividend for 16 consecutive years.
Risk Assessment and Volatility
Understanding the risk associated with each stock is crucial for investors. Bath & Body Works has a beta of 1.53, indicating that its stock price is 53% more volatile than the S&P 500. Conversely, Tractor Supply’s beta is 0.7, signifying that it is 30% less volatile than the index. This difference in volatility suggests that Tractor Supply may present a lower risk for investors seeking stability.
Conclusion
In summary, Tractor Supply demonstrates strength in several areas, outperforming Bath & Body Works on 10 out of 17 factors evaluated. Nevertheless, Bath & Body Works offers a higher potential upside and superior dividend yield, which may appeal to income-focused investors. Each company has its unique strengths, making them worthy of consideration depending on individual investment strategies.
About Bath & Body Works: Founded in 1963 by Leslie Herbert Wexner, Bath & Body Works specializes in fragrances and personal care products, with headquarters in Columbus, Ohio.
About Tractor Supply: Established in 1938, Tractor Supply operates as a rural lifestyle retailer based in Brentwood, Tennessee, providing diverse merchandise for farmers and animal owners across the United States.
