MPLX LP (NYSE:MPLX) shares are down more than -0.70% this year and recently increased 1.85% or $0.64 to settle at $35.22. Twenty-First Century Fox, Inc. (NASDAQ:FOX), on the other hand, is up 5.95% year to date as of 03/05/2018. It currently trades at $36.15 and has returned -5.86% during the past week.
MPLX LP (NYSE:MPLX) and Twenty-First Century Fox, Inc. (NASDAQ:FOX) are the two most active stocks in the market based on today’s trading volumes. To determine if one is a better investment than the other, we will compare the two companies’ growth, profitability, risk, return, and valuation characteristics, as well as their analyst ratings and sentiment signals.
One of the key things investors look for in a company is the ability to grow earnings at a high compound rate over time. Analysts expect MPLX to grow earnings at a 7.00% annual rate over the next 5 years. Comparatively, FOX is expected to grow at a 10.40% annual rate. All else equal, FOX’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 25.98% for Twenty-First Century Fox, Inc. (FOX).
Earnings don’t always accurately reflect the amount of cash that a company brings in. MPLX’s free cash flow (“FCF”) per share for the trailing twelve months was +0.40. Comparatively, FOX’s free cash flow per share was -0.46. On a percent-of-sales basis, MPLX’s free cash flow was 8.21% while FOX converted -2.99% of its revenues into cash flow. This means that, for a given level of sales, MPLX is able to generate more free cash flow for investors.
MPLX trades at a forward P/E of 17.49, a P/B of 1.37, and a P/S of 7.39, compared to a forward P/E of 16.07, a P/B of 3.64, for FOX. MPLX 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
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. MPLX is currently priced at a -16.56% to its one-year price target of 42.21. Comparatively, FOX is -19.67% relative to its price target of 45.00. This suggests that FOX 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 1.90 for MPLX and 1.00 for FOX, which implies that analysts are more bullish on the outlook for MPLX.
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. MPLX has a short ratio of 5.71 compared to a short interest of 2.04 for FOX. This implies that the market is currently less bearish on the outlook for FOX.
Twenty-First Century Fox, Inc. (NASDAQ:FOX) beats MPLX LP (NYSE:MPLX) on a total of 8 of the 14 factors compared between the two stocks. FOX is more profitable and has lower financial risk. In terms of valuation, FOX is the cheaper of the two stocks on an earnings and sales basis, FOX is more undervalued relative to its price target. Finally, FOX has better sentiment signals based on short interest.