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Critical Comparison: US Foods Holding Corp. (USFD) vs. Corcept Therapeutics Incorporated (CORT)

US Foods Holding Corp. (NYSE:USFD) shares are up more than 9.49% this year and recently increased 2.61% or $0.89 to settle at $34.96. Corcept Therapeutics Incorporated (NASDAQ:CORT), on the other hand, is down -2.49% year to date as of 05/15/2018. It currently trades at $17.61 and has returned 1.44% during the past week.

US Foods Holding Corp. (NYSE:USFD) and Corcept Therapeutics Incorporated (NASDAQ:CORT) are the two most active stocks in the Food Wholesale 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

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 USFD to grow earnings at a 27.29% annual rate over the next 5 years. Comparatively, CORT is expected to grow at a -4.90% annual rate. All else equal, USFD’s higher growth rate would imply a greater potential for capital appreciation.

Profitability and Returns

Growth isn’t very attractive to investors if companies are sacrificing profitability and shareholder returns to achieve that growth. We will use EBITDA margin and Return on Investment (ROI), which control for differences in capital structure between the two companies, to measure profitability and return., compared to an EBITDA margin of 37.07% for Corcept Therapeutics Incorporated (CORT). USFD’s ROI is 6.60% while CORT has a ROI of 85.00%. The interpretation is that CORT’s business generates a higher return on investment than USFD’s.

Cash Flow



Earnings don’t always accurately reflect the amount of cash that a company brings in. USFD’s free cash flow (“FCF”) per share for the trailing twelve months was +0.62. Comparatively, CORT’s free cash flow per share was +0.27. On a percent-of-sales basis, USFD’s free cash flow was 0.55% while CORT converted 0.02% of its revenues into cash flow. This means that, for a given level of sales, USFD is able to generate more free cash flow for investors.

Liquidity and Financial Risk

Balance sheet risk is one of the biggest factors to consider before investing. USFD has a current ratio of 1.30 compared to 5.40 for CORT. This means that CORT can more easily cover its most immediate liabilities over the next twelve months. USFD’s debt-to-equity ratio is 1.34 versus a D/E of 0.00 for CORT. USFD is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

USFD trades at a forward P/E of 14.79, a P/B of 2.64, and a P/S of 0.31, compared to a forward P/E of 11.80, a P/B of 9.42, and a P/S of 11.27 for CORT. 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. USFD is currently priced at a -8.55% to its one-year price target of 38.23. Comparatively, CORT is -28.62% relative to its price target of 24.67. This suggests that CORT is the better investment over the next year.

Insider Activity and Investor Sentiment

Short interest, or the percentage of a stock’s tradable shares currently being shorted, is another metric investors use to get a pulse on sentiment. USFD has a short ratio of 3.76 compared to a short interest of 12.39 for CORT. This implies that the market is currently less bearish on the outlook for USFD.

Summary




Corcept Therapeutics Incorporated (NASDAQ:CORT) beats US Foods Holding Corp. (NYSE:USFD) on a total of 7 of the 14 factors compared between the two stocks. CORT is growing fastly, generates a higher return on investment, higher liquidity and has lower financial risk. CORT is more undervalued relative to its price target. Finally, CRK has better sentiment signals based on short interest.

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