Cousins Properties Incorporated (NYSE:CUZ) shares are down more than -8.86% this year and recently decreased -0.24% or -$0.02 to settle at $8.43. Twenty-First Century Fox, Inc. (NASDAQ:FOXA), on the other hand, is up 5.85% year to date as of 02/14/2018. It currently trades at $36.55 and has returned 1.36% during the past week.
Cousins Properties Incorporated (NYSE:CUZ) and Twenty-First Century Fox, Inc. (NASDAQ:FOXA) are the two most active stocks in the market based on today’s trading volumes. The market is clearly enthusiastic about both these stocks, but which is the better investment? To answer this, we will compare the two companies based on the strength of their growth, profitability, risk, returns, valuation, analyst recommendations, and insider trends.
The ability to consistently grow earnings at a high compound rate is a defining characteristic of the best companies for long-term investment. Comparatively, FOXA is expected to grow at a 9.16% annual rate. All else equal, FOXA’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. , compared to an EBITDA margin of 20.02% for Twenty-First Century Fox, Inc. (FOXA).
The value of a stock is simply the present value of its future free cash flows. CUZ’s free cash flow (“FCF”) per share for the trailing twelve months was -0.15. Comparatively, FOXA’s free cash flow per share was -0.46. On a percent-of-sales basis, CUZ’s free cash flow was -0.01% while FOXA converted -2.99% of its revenues into cash flow. This means that, for a given level of sales, CUZ is able to generate more free cash flow for investors.
Liquidity and Financial Risk
CUZ’s debt-to-equity ratio is 0.40 versus a D/E of 1.08 for FOXA. FOXA is therefore the more solvent of the two companies, and has lower financial risk.
CUZ trades at a forward P/E of 70.25, a P/B of 1.28, and a P/S of 7.60, compared to a forward P/E of 15.67, a P/B of 3.68, and a P/S of 2.22 for FOXA. CUZ is the cheaper of the two stocks on book value basis but is expensive in terms of P/E and P/S 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
Just because a stock is cheaper doesn’t mean there’s more value to be had. In order to assess value we need to compare the current price to where it’s likely to trade in the future. CUZ is currently priced at a -15.02% to its one-year price target of 9.92. Comparatively, FOXA is -9.37% relative to its price target of 40.33. This suggests that CUZ 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 1.80 for CUZ and 2.40 for FOXA, which implies that analysts are more bullish on the outlook for FOXA.
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. CUZ has a beta of 0.92 and FOXA’s beta is 1.31. CUZ’s shares are therefore the less volatile of the two stocks.
Insider Activity and Investor Sentiment
Short interest, or the percentage of a stock’s tradable shares currently being shorted, is another metric investors use to get a pulse on sentiment.CUZ has a short ratio of 5.83 compared to a short interest of 1.19 for FOXA. This implies that the market is currently less bearish on the outlook for FOXA.
Twenty-First Century Fox, Inc. (NASDAQ:FOXA) beats Cousins Properties Incorporated (NYSE:CUZ) on a total of 7 of the 14 factors compared between the two stocks. FOXA has higher cash flow per share, is more profitable, generates a higher return on investment and higher liquidity. In terms of valuation, FOXA is the cheaper of the two stocks on an earnings and sales basis, Finally, FOXA has better sentiment signals based on short interest.