Reviewing Adidas (OTCMKTS:ADDYY) & Carter’s (NYSE:CRI)

Adidas (OTCMKTS:ADDYY) and Carter’s (NYSE:CRI) are both consumer discretionary companies, but which is the better business? We will contrast the two businesses based on the strength of their valuation, dividends, profitability, earnings, institutional ownership, risk and analyst recommendations.

Dividends

Adidas pays an annual dividend of $0.76 per share and has a dividend yield of 0.7%. Carter’s pays an annual dividend of $1.00 per share and has a dividend yield of 3.2%. Adidas pays out 24.8% of its earnings in the form of a dividend. Carter’s pays out 22.1% 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. Carter’s is clearly the better dividend stock, given its higher yield and lower payout ratio.

Volatility & Risk

Adidas has a beta of 1.22, meaning that its stock price is 22% more volatile than the S&P 500. Comparatively, Carter’s has a beta of 1, meaning that its stock price has a similar volatility profile to the S&P 500.

Valuation and Earnings

This table compares Adidas and Carter’s”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Adidas	$25.63 billion	1.61	$826.72 million	$3.07	37.72
Carter’s	$2.84 billion	0.40	$185.51 million	$4.52	6.90

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

Profitability

This table compares Adidas and Carter’s’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Adidas	4.20%	17.85%	5.10%
Carter’s	5.80%	23.50%	8.27%

Analyst Ratings

This is a summary of current ratings and target prices for Adidas and Carter’s, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Adidas	0	3	4	3	3.00
Carter’s	3	2	0	0	1.40

Carter’s has a consensus price target of $36.80, indicating a potential upside of 17.93%. Given Carter’s’ higher probable upside, analysts plainly believe Carter’s is more favorable than Adidas.

Summary

Adidas beats Carter’s on 8 of the 15 factors compared between the two stocks.

About Adidas

adidas AG, together with its subsidiaries, designs, develops, produces, and markets athletic and sports lifestyle products in Europe, the Middle East, Africa, North America, Greater China, the Asia-Pacific, and Latin America. It offers footwear, apparel, and accessories and gear, such as bags and balls under the adidas brand; golf footwear and apparel under the adidas Golf brand; and outdoor footwear under the Five Ten brand. It sells its products through its own retail stores; mono-branded franchise stores and shop-in-shops; and wholesale and its e-commerce channels. The company was formerly known as adidas-Salomon AG and changed its name to adidas AG in June 2006. adidas AG was founded in 1920 and is headquartered in Herzogenaurach, Germany.

About Carter’s

Carter’s, Inc. engages in the business of brand marketing of young children’s apparel. It operates through the following segments: the United States (US) Retail, US Wholesale, and International. The US Retail segment includes selling products through retail stores and ecommerce websites. The US Wholesale segment focuses on wholesale partners. The International segment is involved in selling in retail stores and ecommerce websites in Canada and Mexico, and to international wholesale customers and licensees. The company was founded by William Carter in 1865 and is headquartered in Atlanta, GA.