Critical Survey: L Brands (LB) vs. Buckle, Inc. (The) (BKE)

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

Dividends

L Brands pays an annual dividend of $2.40 per share and has a dividend yield of 5.6%. Buckle, Inc. (The) pays an annual dividend of $1.00 per share and has a dividend yield of 5.8%. L Brands pays out 70.4% of its earnings in the form of a dividend. Buckle, Inc. (The) pays out 55.6% 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. L Brands has raised its dividend for 6 consecutive years and Buckle, Inc. (The) has raised its dividend for 3 consecutive years. Buckle, Inc. (The) is clearly the better dividend stock, given its higher yield and lower payout ratio.

Volatility and Risk

L Brands has a beta of 0.68, suggesting that its stock price is 32% less volatile than the S&P 500. Comparatively, Buckle, Inc. (The) has a beta of 0.92, suggesting that its stock price is 8% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current recommendations and price targets for L Brands and Buckle, Inc. (The), as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
L Brands 4 16 10 0 2.20
Buckle, Inc. (The) 1 0 0 0 1.00

L Brands currently has a consensus target price of $46.50, suggesting a potential upside of 8.34%. Buckle, Inc. (The) has a consensus target price of $13.00, suggesting a potential downside of 24.20%. Given L Brands’ stronger consensus rating and higher probable upside, research analysts clearly believe L Brands is more favorable than Buckle, Inc. (The).

Institutional and Insider Ownership

79.5% of L Brands shares are held by institutional investors. Comparatively, 59.5% of Buckle, Inc. (The) shares are held by institutional investors. 16.7% of L Brands shares are held by company insiders. Comparatively, 41.7% of Buckle, Inc. (The) shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Valuation & Earnings

This table compares L Brands and Buckle, Inc. (The)’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
L Brands $12.26 billion 0.99 $2.34 billion $3.41 12.59
Buckle, Inc. (The) $927.07 million 0.89 $167.12 million $1.80 9.53

L Brands has higher revenue and earnings than Buckle, Inc. (The). Buckle, Inc. (The) is trading at a lower price-to-earnings ratio than L Brands, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares L Brands and Buckle, Inc. (The)’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
L Brands 8.04% -103.18% 12.00%
Buckle, Inc. (The) 9.40% 19.96% 15.04%

Summary

L Brands beats Buckle, Inc. (The) on 10 of the 17 factors compared between the two stocks.

L Brands Company Profile

L Brands, Inc. operates specialty retail business. The Company is focused on women’s intimate and other apparel, personal care, beauty and home fragrance categories. Its segments include Victoria’s Secret, Bath & Body Works, and Victoria’s Secret and Bath & Body Works International. It sells its merchandise through company-owned specialty retail stores in the United States, Canada, the United Kingdom and Greater China, which are mall-based; through Websites, and through international franchise, license and wholesale partners. It operates in the retail brands, which include Victoria’s Secret, PINK, Bath & Body Works and La Senza. La Senza is a specialty retailer of women’s intimate apparel. It sells its La Senza products at over 120 La Senza stores in Canada. Henri Bendel sells handbags, jewelry and other accessory products through New York and 28 other stores. Mast Global is a merchandise sourcing and production function serving the Company and its international partners.

Buckle, Inc. (The) Company Profile

The Buckle, Inc. is a retailer of casual apparel, footwear and accessories for young men and women. As of January 28, 2017, the Company operated 467 retail stores in 44 states throughout the United States under the names Buckle and The Buckle. The Company markets a selection of brand name casual apparel, including denims, other casual bottoms, tops, sportswear, outerwear, accessories and footwear. The Company provides customer services, such as free hemming, free gift-wrapping, easy layaways, the Buckle private label credit card, and a guest loyalty program. The Company offers denims from brands, such as Miss Me, Rock Revival, Big Star Vintage, Buffalo Jeans, KanCan, Flying Monkey and Levi’s. Its other brands include Hurley, Billabong, Affliction, American Fighter, Fast & Furious, Oakley, Fox, Puma, Obey, RVCA, Salvage, 7 Diamonds, Nixon, Amuse Society, Free People, White Crow, Corral, Reef, Kustom, Timberland, UGG, TOMS, SAXX, Stance, Lokai, Ray-Ban, and Fossil.

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