Critical Analysis: Lulu’s Fashion Lounge (NASDAQ:LVLU) vs. Rent the Runway (NASDAQ:RENT)

Lulu’s Fashion Lounge (NASDAQ:LVLU) and Rent the Runway (NASDAQ:RENT) are both small-cap retail/wholesale companies, but which is the better business? We will contrast the two businesses based on the strength of their earnings, profitability, risk, valuation, analyst recommendations, institutional ownership and dividends.

Volatility & Risk

Lulu’s Fashion Lounge has a beta of 0.42, suggesting that its share price is 58% less volatile than the S&P 500. Comparatively, Rent the Runway has a beta of 1.23, suggesting that its share price is 23% more volatile than the S&P 500.

Analyst Ratings

This is a summary of current recommendations for Lulu’s Fashion Lounge and Rent the Runway, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Lulu’s Fashion Lounge	1	0	0	0	1.00
Rent the Runway	1	0	0	0	1.00

Insider & Institutional Ownership

73.8% of Lulu’s Fashion Lounge shares are owned by institutional investors. Comparatively, 73.1% of Rent the Runway shares are owned by institutional investors. 6.8% of Lulu’s Fashion Lounge shares are owned by company insiders. Comparatively, 8.2% of Rent the Runway 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.

Profitability

This table compares Lulu’s Fashion Lounge and Rent the Runway’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Lulu’s Fashion Lounge	-3.56%	-423.50%	-9.95%
Rent the Runway	6.85%	N/A	-32.17%

Earnings and Valuation

This table compares Lulu’s Fashion Lounge and Rent the Runway”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Lulu’s Fashion Lounge	$275.66 million	0.10	-$13.71 million	($3.50)	-2.77
Rent the Runway	$329.80 million	0.37	$22.60 million	$0.48	7.63

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

Summary

Rent the Runway beats Lulu’s Fashion Lounge on 9 of the 11 factors compared between the two stocks.

About Lulu’s Fashion Lounge

Lulu’s Fashion Lounge Holdings, Inc. engages in providing an online website for clothing. It offers retailing of women’s clothing, shoes, and accessories. The company was founded in 1996 and is headquartered in Chico, CA.

About Rent the Runway

Rent the Runway, Inc. operates shared designer closet in the United States. The company offers evening wear and accessories, ready-to-wear, workwear, denim, casual, maternity, outerwear, blouses, knitwear, loungewear, jewelry, handbags, activewear, and ski wear under subscription, rental, and resale offering. It also engages in the software development and support activities. Rent the Runway, Inc. was incorporated in 2009 and is headquartered in Brooklyn, New York.