Finance

A Side-by-side Analysis of Brandywine Realty Trust (BDN) and Cloudera, Inc. (CLDR)

Brandywine Realty Trust (NYSE:BDN) shares are down more than -14.90% this year and recently decreased -0.13% or -$0.02 to settle at $15.48. Cloudera, Inc. (NYSE:CLDR), on the other hand, is down -15.13% year to date as of 04/16/2018. It currently trades at $14.02 and has returned 10.05% during the past week.

Brandywine Realty Trust (NYSE:BDN) and Cloudera, Inc. (NYSE:CLDR) are the two most active stocks in the REIT – Diversified industry based on today’s trading volumes. Investor interest in the two stocks is clearly very high, but which is the better investment? To answer this question, we will compare the two companies across growth, profitability, risk, and valuation metrics, and also examine their analyst ratings and insider activity trends.

Growth

Companies that can consistently grow earnings at a high compound rate usually have the greatest potential to create value for shareholders in the long-run. Analysts expect BDN to grow earnings at a 5.00% annual rate over the next 5 years. Comparatively, CLDR is expected to grow at a -4.60% annual rate. All else equal, BDN’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. Brandywine Realty Trust (BDN) has an EBITDA margin of 73.45%. This suggests that BDN underlying business is more profitable BDN’s ROI is 2.70% while CLDR has a ROI of -80.50%. The interpretation is that BDN’s business generates a higher return on investment than CLDR’s.

Cash Flow



The amount of free cash flow available to investors is ultimately what determines the value of a stock. BDN’s free cash flow (“FCF”) per share for the trailing twelve months was -0.06. Comparatively, CLDR’s free cash flow per share was -0.18. On a percent-of-sales basis, BDN’s free cash flow was -0% while CLDR converted -0.01% of its revenues into cash flow. This means that, for a given level of sales, BDN is able to generate more free cash flow for investors.

Liquidity and Financial Risk

BDN’s debt-to-equity ratio is 1.06 versus a D/E of 0.00 for CLDR. BDN is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

BDN trades at a forward P/E of 53.38, a P/B of 1.49, and a P/S of 5.26, compared to a P/B of 6.20, and a P/S of 5.38 for CLDR. 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 isn’t a good investment if the stock is priced accurately. To get a sense of “value” we must compare the current price to some measure of intrinsic value such as a price target. BDN is currently priced at a -17.53% to its one-year price target of 18.77. Comparatively, CLDR is -27.73% relative to its price target of 19.40. This suggests that CLDR is the better investment over the next year.

Insider Activity and Investor Sentiment

Short interest is another tool that analysts use to gauge investor sentiment. It represents the percentage of a stock’s tradable shares that are being shorted. BDN has a short ratio of 4.50 compared to a short interest of 2.41 for CLDR. This implies that the market is currently less bearish on the outlook for CLDR.

Summary

Cloudera, Inc. (NYSE:CLDR) beats Brandywine Realty Trust (NYSE:BDN) on a total of 7 of the 14 factors compared between the two stocks. CLDR is growing fastly and has lower financial risk. CLDR is more undervalued relative to its price target. Finally, CLDR has better sentiment signals based on short interest.

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