Urban Outfitters, Inc. (URBN) vs. DENTSPLY SIRONA Inc. (XRAY): Breaking Down the Apparel Stores Industry’s Two Hottest Stocks

Urban Outfitters, Inc. (NASDAQ:URBN) shares are up more than 36.62% this year and recently increased 1.87% or $0.88 to settle at $47.90. DENTSPLY SIRONA Inc. (NASDAQ:XRAY), on the other hand, is down -32.89% year to date as of 06/12/2018. It currently trades at $44.18 and has returned 4.47% during the past week.

Urban Outfitters, Inc. (NASDAQ:URBN) and DENTSPLY SIRONA Inc. (NASDAQ:XRAY) are the two most active stocks in the Apparel Stores industry based on today’s trading volumes. We will compare the two companies based on the strength of various metrics, including growth, profitability, risk, return, and valuation to determine if one is a better investment than the other.


The ability to grow earnings at a compound rate over time is a crucial determinant of investment value. Analysts expect URBN to grow earnings at a 15.50% annual rate over the next 5 years. Comparatively, XRAY is expected to grow at a 5.14% annual rate. All else equal, URBN’s higher growth rate would imply a greater potential for capital appreciation.

Profitability and Returns

Growth in and of itself is not necessarily valuable, and it can even be harmful to shareholders if companies overinvest in unprofitable projects in pursuit of that growth. We will use EBITDA margin and Return on Investment (ROI), which adjust for differences in capital structure, as measure of profitability and return. Urban Outfitters, Inc. (URBN) has an EBITDA margin of 10.78%. This suggests that URBN underlying business is more profitable URBN’s ROI is 13.20% while XRAY has a ROI of -18.00%. The interpretation is that URBN’s business generates a higher return on investment than XRAY’s.

Cash Flow

The value of a stock is simply the present value of its future free cash flows. On a percent-of-sales basis, URBN’s free cash flow was 0% while XRAY converted 0% of its revenues into cash flow. This means that, for a given level of sales, URBN is able to generate more free cash flow for investors.

Liquidity and Financial Risk

Liquidity and leverage ratios measure a company’s ability to meet short-term obligations and longer-term debts. URBN has a current ratio of 2.70 compared to 2.20 for XRAY. This means that URBN can more easily cover its most immediate liabilities over the next twelve months. URBN’s debt-to-equity ratio is 0.00 versus a D/E of 0.25 for XRAY. XRAY is therefore the more solvent of the two companies, and has lower financial risk.


URBN trades at a forward P/E of 18.21, a P/B of 3.99, and a P/S of 1.41, compared to a forward P/E of 15.50, a P/B of 1.50, and a P/S of 2.48 for XRAY. URBN is the cheaper of the two stocks on sales basis but is expensive in terms of P/E and P/B ratio. Given that earnings are what matter most to investors, analysts tend to place a greater weight on the P/E.

Analyst Price Targets and Opinions

A cheap stock isn’t a good investment if the stock is priced accurately. To get a sense of “value” we must compare the current price to some measure of intrinsic value such as a price target. URBN is currently priced at a 10.55% to its one-year price target of 43.33. Comparatively, XRAY is -25.6% relative to its price target of 59.38. This suggests that XRAY is the better investment over the next year.

Risk and Volatility

Beta is an important measure that gives investors a sense of the market risk associated with a particular stock. A beta above 1 signals above average market risk, while a beta below 1 implies below average volatility. URBN has a beta of 0.53 and XRAY’s beta is 1.23. URBN’s shares are therefore the less volatile of the two stocks.

Insider Activity and Investor Sentiment

The analysis of insider buying and selling trends can be extended to the aggregate level. Short interest, which represents the percentage of a stock’s tradable shares currently being shorted, captures what the market as a whole feels about a stock. URBN has a short ratio of 3.78 compared to a short interest of 2.19 for XRAY. This implies that the market is currently less bearish on the outlook for XRAY.


Urban Outfitters, Inc. (NASDAQ:URBN) beats DENTSPLY SIRONA Inc. (NASDAQ:XRAY) on a total of 7 of the 14 factors compared between the two stocks. URBN is growing fastly, is more profitable, generates a higher return on investment, higher liquidity and has lower financial risk. Finally, MEET has better sentiment signals based on short interest.

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