Analyzing Carter’s (NYSE:CRI) and Tapestry (NYSE:TPR)

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

Dividends

Carter’s pays an annual dividend of $1.00 per share and has a dividend yield of 3.2%. Tapestry pays an annual dividend of $1.85 per share and has a dividend yield of 1.6%. Carter’s pays out 18.7% of its earnings in the form of a dividend. Tapestry pays out 25.4% 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. Tapestry has raised its dividend for 3 consecutive years. Carter’s is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings & Valuation

This table compares Carter’s and Tapestry”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Carter’s	$2.98 billion	0.39	$91.80 million	$5.34	5.91
Tapestry	$8.00 billion	2.89	$1.53 billion	$7.29	15.92

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

Insider and Institutional Ownership

90.8% of Tapestry shares are owned by institutional investors. 3.2% of Carter’s shares are owned by insiders. Comparatively, 1.3% of Tapestry shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Carter’s	6.55%	12.78%	4.67%
Tapestry	19.09%	254.95%	22.75%

Analyst Ratings

This is a summary of current ratings and price targets for Carter’s and Tapestry, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Carter’s	0	5	3	1	2.56
Tapestry	0	4	15	2	2.90

Carter’s presently has a consensus price target of $40.86, indicating a potential upside of 29.54%. Tapestry has a consensus price target of $170.00, indicating a potential upside of 46.44%. Given Tapestry’s stronger consensus rating and higher probable upside, analysts clearly believe Tapestry is more favorable than Carter’s.

Volatility and Risk

Carter’s has a beta of 0.84, suggesting that its stock price is 16% less volatile than the S&P 500. Comparatively, Tapestry has a beta of 1.42, suggesting that its stock price is 42% more volatile than the S&P 500.

Summary

Tapestry beats Carter’s on 15 of the 18 factors compared between the two stocks.

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.

About Tapestry

Tapestry, Inc. provides luxury accessories and branded lifestyle products in the United States, Japan, Greater China, and internationally. The company operates in three segments: Coach, Kate Spade, and Stuart Weitzman. It offers women’s handbags; and women’s accessories, such as small leather goods which includes mini and micro handbags, money pieces, wristlets, pouches, and cosmetic cases, as well as novelty accessories including address books, time management and travel accessories, sketchbooks, and portfolios; and belts, key rings, and charms. The company also provides men products, which includes bag collections, such as business cases, computer bags, messenger-style bags, backpacks, and totes; small leather goods including wallets, card cases, travel organizers, and belts; and footwear, watches, fragrances, sunglasses, novelty accessories, and ready-to-wear items. In addition, it offers other products including women’s footwear and fragrances; eyewear and sunglasses; and jewelry, such as bracelets, necklaces, rings, and earrings, watches, and other women’s seasonal lifestyle apparel collections, including outerwear, ready-to-wear and cold weather accessories, such as gloves, scarves, and hats. Further, the company provides kids items, housewares, and home accessories, such as fashion bedding and tableware, stationery, and gifts. It offers its products through e-commerce sites and concession shop-in-shops, wholesale, and third-party distributors under the Coach, Kate Spade, and Stuart Weitzman brand names. The company was formerly known as Coach, Inc. and changed its name to Tapestry, Inc. in October 2017. Tapestry, Inc. was founded in 1941 and is headquartered in New York, New York.