Analyzing Abercrombie & Fitch (NYSE:ANF) and Winmark (NASDAQ:WINA)

Winmark (NASDAQ:WINA) and Abercrombie & Fitch (NYSE:ANF) are both consumer discretionary companies, but which is the better stock? We will compare the two businesses based on the strength of their valuation, earnings, profitability, analyst recommendations, risk, institutional ownership and dividends.

Earnings & Valuation

This table compares Winmark and Abercrombie & Fitch”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Winmark	$86.06 million	11.91	$41.65 million	$11.02	25.91
Abercrombie & Fitch	$5.34 billion	1.08	$506.92 million	$11.68	11.61

Abercrombie & Fitch has higher revenue and earnings than Winmark. Abercrombie & Fitch is trading at a lower price-to-earnings ratio than Winmark, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

73.3% of Winmark shares are owned by institutional investors. 10.4% of Winmark shares are owned by company insiders. Comparatively, 2.3% of Abercrombie & Fitch shares are owned by company 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.

Analyst Ratings

This is a breakdown of current ratings for Winmark and Abercrombie & Fitch, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Winmark	0	1	0	0	2.00
Abercrombie & Fitch	0	5	8	2	2.80

Abercrombie & Fitch has a consensus price target of $155.38, suggesting a potential upside of 14.54%. Given Abercrombie & Fitch’s stronger consensus rating and higher probable upside, analysts plainly believe Abercrombie & Fitch is more favorable than Winmark.

Dividends

Winmark pays an annual dividend of $4.08 per share and has a dividend yield of 1.4%. Abercrombie & Fitch pays an annual dividend of $0.80 per share and has a dividend yield of 0.6%. Winmark pays out 37.0% of its earnings in the form of a dividend. Abercrombie & Fitch pays out 6.8% 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. Winmark has raised its dividend for 5 consecutive years. Winmark is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

Winmark has a beta of 0.54, meaning that its stock price is 46% less volatile than the S&P 500. Comparatively, Abercrombie & Fitch has a beta of 0.97, meaning that its stock price is 3% less volatile than the S&P 500.

Profitability

This table compares Winmark and Abercrombie & Fitch’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Winmark	47.09%	-99.47%	103.54%
Abercrombie & Fitch	10.03%	33.52%	13.05%

Summary

Abercrombie & Fitch beats Winmark on 10 of the 18 factors compared between the two stocks.

About Winmark

Winmark Corporation, a resale company operates as a franchisor for small business in the United States and Canada. The company franchises retail stores concepts that buy, sell and trade merchandise. It also operates middle-market equipment leasing business. In addition, the company buys and sells used clothing and accessories geared toward the teenage and young adult market under Plato’s Closet brand; and operates stores which buys and sells used and new children’s clothing, toys, furniture, equipment, and accessories primarily to parents of children ages infant to 12 years under the Once Upon A Child brand. Further, it buys, sells, trades in, and used and new sporting goods, equipment, and accessories for various athletic activities including team sports, such as baseball/softball, hockey, football, lacrosse, and soccer, as well as fitness, ski/snowboard, golf, and others under the Play It Again Sports brand; and buys and sells used women’s apparel, shoes, and accessories under the Style Encore brand. Additionally, the company buys, sells, trades in, and used and new musical instruments, speakers, amplifiers, music-related electronics, and related accessories under the Music Go Round brand. Winmark Corporation was incorporated in 1988 and is headquartered in Minneapolis, Minnesota.

About Abercrombie & Fitch

Abercrombie & Fitch Co. engages in the retail of apparel, personal care products, and accessories. The firm operates through following geographical segments: Americas, EMEA and APAC. The Americas segment includes operations in North America and South America. The EMEA segment includes operations in Europe, the Middle East and Africa. The APAC segment includes operations in the Asia-Pacific region, including Asia and Oceania. The company was founded by David Abercrombie in 1892 and is headquartered in New Albany, OH.