Brixmor Property Group Inc. (NYSE:BRX) shares are down more than -19.56% this year and recently increased 1.08% or $0.16 to settle at $15.01. Omnicom Group Inc. (NYSE:OMC), on the other hand, is up 13.66% year to date as of 02/14/2018. It currently trades at $82.78 and has returned 9.82% during the past week.
Brixmor Property Group Inc. (NYSE:BRX) and Omnicom Group Inc. (NYSE:OMC) are the two most active stocks in the market 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.
Companies that can increase earnings at a high compound rate over time are attractive to investors. Analysts expect BRX to grow earnings at a -5.09% annual rate over the next 5 years. Comparatively, OMC is expected to grow at a 6.80% annual rate. All else equal, OMC’s higher growth rate would imply a greater potential for capital appreciation.
Profitability and Returns
Growth doesn’t mean much if it comes at the cost of weak profitability. To adjust for differences in capital structure we’ll use EBITDA margin and Return on Investment (ROI) as measures of profitability and return. , compared to an EBITDA margin of 15.84% for Omnicom Group Inc. (OMC).
Cash is king when it comes to investing. BRX’s free cash flow (“FCF”) per share for the trailing twelve months was -0.02. Comparatively, OMC’s free cash flow per share was +0.03. On a percent-of-sales basis, BRX’s free cash flow was -0.48% while OMC converted 0.04% of its revenues into cash flow. This means that, for a given level of sales, OMC is able to generate more free cash flow for investors.
Liquidity and Financial Risk
BRX’s debt-to-equity ratio is 1.96 versus a D/E of 1.97 for OMC. OMC is therefore the more solvent of the two companies, and has lower financial risk.
BRX trades at a forward P/E of 19.88, a P/B of 1.57, and a P/S of 3.58, compared to a forward P/E of 14.96, a P/B of 7.59, and a P/S of 1.25 for OMC. BRX 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
A cheap stock is not necessarily a value stock. Most of the time, a stock is cheap for good reason. A stock only has value if the current price is substantially below the price at which it should trade in the future. BRX is currently priced at a -24.72% to its one-year price target of 19.94. Comparatively, OMC is 7.1% relative to its price target of 77.29. This suggests that BRX 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 2.40 for BRX and 3.10 for OMC, which implies that analysts are more bullish on the outlook for OMC.
Risk and Volatility
To gauge the market risk of a particular stock, investors use beta. Stocks with a beta above 1 are more volatile than the market as a whole. Conversely, a beta below 1 implies below average systematic risk. BRX has a beta of 0.52 and OMC’s beta is 1.02. BRX’s shares are therefore the less volatile of the two stocks.
Insider Activity and Investor Sentiment
Comparing the number of shares sold short to the float is a method analysts often use to get a reading on investor sentiment. BRX has a short ratio of 1.61 compared to a short interest of 10.30 for OMC. This implies that the market is currently less bearish on the outlook for BRX.
Omnicom Group Inc. (NYSE:OMC) beats Brixmor Property Group Inc. (NYSE:BRX) on a total of 7 of the 14 factors compared between the two stocks. OMC is more profitable, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate and higher liquidity. In terms of valuation, OMC is the cheaper of the two stocks on an earnings and sales basis, Finally, IBN has better sentiment signals based on short interest.