Analyzing ARKO (NASDAQ:ARKO) and GAP (NYSE:GAP)

ARKO (NASDAQ:ARKO) and GAP (NYSE:GAP) are both consumer discretionary companies, but which is the better investment? We will contrast the two businesses based on the strength of their valuation, profitability, risk, analyst recommendations, institutional ownership, dividends and earnings.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for ARKO and GAP, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
ARKO	1	1	1	0	2.00
GAP	1	11	5	2	2.42

ARKO presently has a consensus target price of $14.50, indicating a potential upside of 220.80%. GAP has a consensus target price of $27.07, indicating a potential upside of 25.46%. Given ARKO’s higher probable upside, research analysts plainly believe ARKO is more favorable than GAP.

Dividends

ARKO pays an annual dividend of $0.12 per share and has a dividend yield of 2.7%. GAP pays an annual dividend of $0.70 per share and has a dividend yield of 3.2%. ARKO pays out 171.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. GAP pays out 20.9% of its earnings in the form of a dividend. GAP has increased its dividend for 1 consecutive years. GAP is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional & Insider Ownership

78.3% of ARKO shares are owned by institutional investors. Comparatively, 58.8% of GAP shares are owned by institutional investors. 21.9% of ARKO shares are owned by company insiders. Comparatively, 31.0% of GAP shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Valuation & Earnings

This table compares ARKO and GAP”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
ARKO	$7.64 billion	0.07	$22.74 million	$0.07	64.57
GAP	$15.37 billion	0.49	$816.00 million	$3.35	6.44

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

Risk and Volatility

ARKO has a beta of 0.91, indicating that its share price is 9% less volatile than the S&P 500. Comparatively, GAP has a beta of 2.08, indicating that its share price is 108% more volatile than the S&P 500.

Profitability

This table compares ARKO and GAP’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
ARKO	0.19%	4.02%	0.41%
GAP	8.14%	19.72%	5.94%

Summary

GAP beats ARKO on 15 of the 18 factors compared between the two stocks.

About ARKO

Arko Corp. operates convenience stores in the United States. It operates through Retail, Wholesale, Fleet Fueling, and GPMP segments. The Retail segment engages in the sale of fuel and merchandise to retail consumers. Its Wholesale segment supplies fuel to third-party dealers and consignment agents. The Fleet Fueling segment supplies fuel to proprietary and third-party cardlock, and issuance of proprietary fuel cards. Its GPMP segment supplies fuel to retail and wholesale segments. The company is based in Richmond, Virginia.

About GAP

Gap, Inc. operates as a global apparel retail company, which offers clothing, apparel, accessories, and personal care products for men, women, and children. The firm operates through the following segments: Gap Global, Old Navy Global, Banana Republic Global, Athleta, and Other. The Gap Global segment includes apparel and accessories for men and women under the Gap brand, along with the GapKids, BabyGap, GapMaternity, GapBody, and GapFit collections. The Old Navy Global segment offers clothing and accessories for adults and children. The Banana Republic Global segment provides clothing, eyewear, jewelry, shoes, handbags, and fragrances. The Athleta segment offers fitness apparel for women. The company founded by Donald G. Fisher and Doris F. Fisher in July 1969 and is headquartered in San Francisco, CA.