Critical Review: GAP (GAP) and Its Peers

GAP (NYSE:GAP) is one of 15 publicly-traded companies in the “Family clothing stores” industry, but how does it contrast to its peers? We will compare GAP to related companies based on the strength of its analyst recommendations, institutional ownership, dividends, valuation, earnings, profitability and risk.

Analyst Ratings

This is a summary of recent ratings and recommmendations for GAP and its peers, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
GAP	0	3	0	0	2.00
GAP Competitors	359	2141	2393	31	2.43

GAP currently has a consensus target price of $27.00, indicating a potential upside of 23.85%. As a group, “Family clothing stores” companies have a potential upside of 12.45%. Given GAP’s higher probable upside, analysts clearly believe GAP is more favorable than its peers.

Dividends

GAP pays an annual dividend of $0.60 per share and has a dividend yield of 2.8%. GAP pays out 29.7% of its earnings in the form of a dividend. As a group, “Family clothing stores” companies pay a dividend yield of 1.8% and pay out 37.8% of their earnings in the form of a dividend. GAP is clearly a better dividend stock than its peers, given its higher yield and lower payout ratio.

Profitability

This table compares GAP and its peers’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
GAP	5.05%	28.89%	6.92%
GAP Competitors	3.12%	-376.16%	6.89%

Risk and Volatility

GAP has a beta of 2.35, suggesting that its stock price is 135% more volatile than the S&P 500. Comparatively, GAP’s peers have a beta of 1.81, suggesting that their average stock price is 81% more volatile than the S&P 500.

Earnings & Valuation

This table compares GAP and its peers gross revenue, earnings per share and valuation.

	Gross Revenue	Net Income	Price/Earnings Ratio
GAP	$14.89 billion	$502.00 million	10.79
GAP Competitors	$10.64 billion	$637.10 million	10.96

GAP has higher revenue, but lower earnings than its peers. GAP is trading at a lower price-to-earnings ratio than its peers, indicating that it is currently more affordable than other companies in its industry.

Institutional and Insider Ownership

58.8% of GAP shares are owned by institutional investors. Comparatively, 71.6% of shares of all “Family clothing stores” companies are owned by institutional investors. 31.0% of GAP shares are owned by company insiders. Comparatively, 14.3% of shares of all “Family clothing stores” companies are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Summary

GAP beats its peers on 9 of the 15 factors compared.

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.