Washington Prime Group Inc. (NYSE:WPG) shares are down more than -20.37% this year and recently increased 0.71% or $0.04 to settle at $5.67. Forest City Realty Trust, Inc. (NYSE:FCE-A), on the other hand, is down -8.92% year to date as of 02/12/2018. It currently trades at $21.95 and has returned -1.53% during the past week.
Washington Prime Group Inc. (NYSE:WPG) and Forest City Realty Trust, Inc. (NYSE:FCE-A) are the two most active stocks in the Property Management industry based on today’s trading volumes. Investors are clearly interested in the two names, but is one a better choice than the other? We will compare the two companies across growth, profitability, risk, valuation, and insider trends to answer this question.
The ability to grow earnings at a compound rate over time is a crucial determinant of investment value. Comparatively, FCE-A is expected to grow at a 6.10% annual rate. All else equal, FCE-A’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. Washington Prime Group Inc. (WPG) has an EBITDA margin of 75.76%. This suggests that WPG underlying business is more profitable WPG’s ROI is 4.90% while FCE-A has a ROI of -5.60%. The interpretation is that WPG’s business generates a higher return on investment than FCE-A’s.
WPG’s debt-to-equity ratio is 3.37 versus a D/E of 1.07 for FCE-A. WPG is therefore the more solvent of the two companies, and has lower financial risk.
WPG trades at a forward P/E of 31.50, a P/B of 1.19, and a P/S of 1.41, compared to a forward P/E of 75.69, a P/B of 1.74, and a P/S of 6.17 for FCE-A. WPG is the cheaper of the two stocks on an earnings, book value and sales basis. 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
Investors often compare a stock’s current price to an analyst price target to get a sense of the potential upside within the next year. WPG is currently priced at a -19.92% to its one-year price target of 7.08. Comparatively, FCE-A is -22.98% relative to its price target of 28.50. This suggests that FCE-A is the better investment over the next year.
The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 3.30 for WPG and 2.00 for FCE-A, which implies that analysts are more bullish on the outlook for WPG.
Risk and Volatility
Analyst use beta to measure a stock’s volatility relative to the overall market. Stocks with a beta above 1 tend to have bigger swings in price than the market as a whole, the opposite being the case for stocks with a beta below 1. WPG has a beta of 0.76 and FCE-A’s beta is 1.00. WPG’s shares are therefore the less volatile of the two stocks.
Insider Activity and Investor Sentiment
Analysts often look at short interest, or the percentage of a company’s float currently being shorted by investors, to aid in their outlook for a particular stock. WPG has a short ratio of 9.26 compared to a short interest of 3.49 for FCE-A. This implies that the market is currently less bearish on the outlook for FCE-A.
Washington Prime Group Inc. (NYSE:WPG) beats Forest City Realty Trust, Inc. (NYSE:FCE-A) on a total of 7 of the 13 factors compared between the two stocks. WPG is more profitable, generates a higher return on investment and higher liquidity. In terms of valuation, WPG is the cheaper of the two stocks on an earnings, book value and sales basis, Finally, NYT has better sentiment signals based on short interest.