Bed Bath & Beyond Inc. (NASDAQ:BBBY) shares are down more than -20.46% this year and recently increased 1.22% or $0.21 to settle at $17.49. Brixmor Property Group Inc. (NYSE:BRX), on the other hand, is down -21.17% year to date as of 04/16/2018. It currently trades at $14.71 and has returned -1.41% during the past week.
Bed Bath & Beyond Inc. (NASDAQ:BBBY) and Brixmor Property Group Inc. (NYSE:BRX) are the two most active stocks in the Home Furnishing Stores industry 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.Growth
The ability to consistently grow earnings at a high compound rate is a defining characteristic of the best companies for long-term investment. Analysts expect BBBY to grow earnings at a -14.90% annual rate over the next 5 years. Comparatively, BRX is expected to grow at a -5.09% annual rate. All else equal, BRX’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 68.9% for Brixmor Property Group Inc. (BRX). BBBY’s ROI is 17.90% while BRX has a ROI of 5.30%. The interpretation is that BBBY’s business generates a higher return on investment than BRX’s.Cash Flow
The amount of free cash flow available to investors is ultimately what determines the value of a stock. BBBY’s free cash flow (“FCF”) per share for the trailing twelve months was +1.82. Comparatively, BRX’s free cash flow per share was -0.04. On a percent-of-sales basis, BBBY’s free cash flow was 2.09% while BRX converted -0.95% of its revenues into cash flow. This means that, for a given level of sales, BBBY is able to generate more free cash flow for investors.Liquidity and Financial Risk
BBBY’s debt-to-equity ratio is 0.54 versus a D/E of 1.95 for BRX. BRX is therefore the more solvent of the two companies, and has lower financial risk.
BBBY trades at a forward P/E of 8.60, a P/B of 0.88, and a P/S of 0.20, compared to a forward P/E of 16.83, a P/B of 1.54, and a P/S of 3.50 for BRX. BBBY is the cheaper of the two stocks on an earnings, book value and sales basis. 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. BBBY is currently priced at a -10.45% to its one-year price target of 19.53. Comparatively, BRX is -19.75% relative to its price target of 18.33. This suggests that BRX is the better investment over the next year.
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. BBBY has a beta of 0.98 and BRX’s beta is 0.38. BRX’s shares are therefore the less volatile of the two stocks.Insider Activity and Investor Sentiment
The analysis of insider buying and selling trends can be extended to the aggregate level. Short interest, which represents the percentage of a stock’s tradable shares currently being shorted, captures what the market as a whole feels about a stock. BBBY has a short ratio of 4.77 compared to a short interest of 1.65 for BRX. This implies that the market is currently less bearish on the outlook for BRX.Summary
Bed Bath & Beyond Inc. (NASDAQ:BBBY) beats Brixmor Property Group Inc. (NYSE:BRX) on a total of 8 of the 14 factors compared between the two stocks. BBBY 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. In terms of valuation, BBBY is the cheaper of the two stocks on an earnings, book value and sales basis, Finally, DVN has better sentiment signals based on short interest.