Global

Dissecting the Numbers for Chicago Bridge & Iron Company N.V. (CBI) and Baozun Inc. (BZUN)

Chicago Bridge & Iron Company N.V. (NYSE:CBI) shares are down more than -14.13% this year and recently decreased -6.48% or -$0.96 to settle at $13.86. Baozun Inc. (NASDAQ:BZUN), on the other hand, is up 45.88% year to date as of 04/13/2018. It currently trades at $46.04 and has returned -0.52% during the past week.

Chicago Bridge & Iron Company N.V. (NYSE:CBI) and Baozun Inc. (NASDAQ:BZUN) are the two most active stocks in the General Contractors industry 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.

Growth

The ability to consistently grow earnings at a high compound rate is a defining characteristic of the best companies for long-term investment. Comparatively, BZUN is expected to grow at a 9.64% annual rate. All else equal, BZUN’s higher growth rate would imply a greater potential for capital appreciation.

Profitability and Returns

A high growth rate isn’t necessarily valuable to investors. In fact, companies that overinvest in low return projects just to achieve a high growth rate can actually destroy shareholder value. Profitability and returns are a measure of the quality of a company’s business and its growth opportunities. We’ll use Return on Investment (ROI) to measure this. CBI’s ROI is -1.90% while BZUN has a ROI of 9.70%. The interpretation is that BZUN’s business generates a higher return on investment than CBI’s.

Cash Flow



The value of a stock is simply the present value of its future free cash flows. CBI’s free cash flow (“FCF”) per share for the trailing twelve months was -2.07. Comparatively, BZUN’s free cash flow per share was -. On a percent-of-sales basis, CBI’s free cash flow was -3.17% while BZUN converted 0% of its revenues into cash flow. This means that, for a given level of sales, BZUN is able to generate more free cash flow for investors.

Liquidity and Financial Risk

Analysts look at liquidity and leverage ratios to assess how easily a company can cover its liabilities. CBI has a current ratio of 0.30 compared to 2.10 for BZUN. This means that BZUN can more easily cover its most immediate liabilities over the next twelve months. CBI’s debt-to-equity ratio is 31.60 versus a D/E of 0.12 for BZUN. CBI is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

CBI trades at a forward P/E of 5.82, a P/B of 19.52, and a P/S of 0.23, compared to a forward P/E of 24.61, a P/B of 8.70, and a P/S of 4.08 for BZUN. 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. CBI is currently priced at a -18.47% to its one-year price target of 17.00. Comparatively, BZUN is 3.34% relative to its price target of 44.55. This suggests that CBI is the better investment over the next year.

Summary

Baozun Inc. (NASDAQ:BZUN) beats Chicago Bridge & Iron Company N.V. (NYSE:CBI) on a total of 10 of the 14 factors compared between the two stocks. BZUN , generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate, higher liquidity and has lower financial risk. Finally, BZUN has better sentiment signals based on short interest.

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