Critical Review: American Eagle Outfitters (NYSE:AEO) & ON (NYSE:ONON)

American Eagle Outfitters (NYSE:AEO) and ON (NYSE:ONON) are both retail/wholesale companies, but which is the better investment? We will contrast the two businesses based on the strength of their institutional ownership, risk, valuation, analyst recommendations, dividends, earnings and profitability.

Profitability

This table compares American Eagle Outfitters and ON’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
American Eagle Outfitters	3.74%	13.67%	5.80%
ON	4.45%	8.75%	5.10%

Analyst Ratings

This is a summary of current ratings and recommmendations for American Eagle Outfitters and ON, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
American Eagle Outfitters	3	9	1	0	1.85
ON	1	1	19	1	2.91

American Eagle Outfitters currently has a consensus price target of $14.72, indicating a potential downside of 13.38%. ON has a consensus price target of $64.20, indicating a potential upside of 56.64%. Given ON’s stronger consensus rating and higher possible upside, analysts plainly believe ON is more favorable than American Eagle Outfitters.

Volatility & Risk

American Eagle Outfitters has a beta of 1.59, suggesting that its stock price is 59% more volatile than the S&P 500. Comparatively, ON has a beta of 2.2, suggesting that its stock price is 120% more volatile than the S&P 500.

Valuation & Earnings

This table compares American Eagle Outfitters and ON”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
American Eagle Outfitters	$5.33 billion	0.54	$329.38 million	$1.04	16.34
ON	$2.63 billion	9.80	$275.23 million	$0.45	91.08

American Eagle Outfitters has higher revenue and earnings than ON. American Eagle Outfitters is trading at a lower price-to-earnings ratio than ON, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

97.3% of American Eagle Outfitters shares are held by institutional investors. Comparatively, 36.4% of ON shares are held by institutional investors. 8.7% of American Eagle Outfitters shares are held by insiders. Comparatively, 68.6% of ON shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Summary

ON beats American Eagle Outfitters on 9 of the 15 factors compared between the two stocks.

About American Eagle Outfitters

American Eagle Outfitters, Inc. operates as a multi-brand specialty retailer in the United States and internationally. The company provides jeans, apparel and accessories, and personal care products for women and men under the American Eagle brand; and intimates, apparel, activewear, and swim collections under the Aerie and OFFLINE by Aerie brands. It also offers menswear products under the Todd Snyder New York brand; and fashion clothing and accessories under the Unsubscribed brand. The company sells its products through own and licensed retail stores; concession-based shops-within-shops; and digital channels, such as www.ae.com, www.aerie.com, www.toddsnyder.com, and www.unsubscribed.com. American Eagle Outfitters, Inc. was founded in 1977 and is headquartered in Pittsburgh, Pennsylvania.

About ON

On Holding AG engages in the development and distribution of sports products such as footwear, apparel, and accessories for high-performance running, outdoor, all-day activities, and tennis. It sells its products worldwide through independent retailers and global distributors, its own online presence, and its own stores. The company was founded by David Allemann, Olivier Bernhard, and Caspar Coppetti in January 2010 and is headquartered in Zurich, Switzerland.