Finance

Critical Comparison: Kimco Realty Corporation (KIM) vs. Fossil Group, Inc. (FOSL)

Kimco Realty Corporation (NYSE:KIM) shares are down more than -7.82% this year and recently increased 1.39% or $0.23 to settle at $16.73. Fossil Group, Inc. (NASDAQ:FOSL), on the other hand, is up 274.13% year to date as of 06/12/2018. It currently trades at $29.07 and has returned 6.80% during the past week.

Kimco Realty Corporation (NYSE:KIM) and Fossil Group, Inc. (NASDAQ:FOSL) are the two most active stocks in the REIT – Retail 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 increase earnings at a high compound rate over time are attractive to investors. Analysts expect KIM to grow earnings at a 4.60% annual rate over the next 5 years. Comparatively, FOSL is expected to grow at a 17.30% annual rate. All else equal, FOSL’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 EBITDA margin and Return on Investment (ROI) to measure this. Kimco Realty Corporation (KIM) has an EBITDA margin of 58.17%. This suggests that KIM underlying business is more profitable KIM’s ROI is 3.10% while FOSL has a ROI of -46.40%. The interpretation is that KIM’s business generates a higher return on investment than FOSL’s.

Cash Flow



The amount of free cash flow available to investors is ultimately what determines the value of a stock. KIM’s free cash flow (“FCF”) per share for the trailing twelve months was -0.08. Comparatively, FOSL’s free cash flow per share was -0.17. On a percent-of-sales basis, KIM’s free cash flow was -2.83% while FOSL converted -0.3% of its revenues into cash flow. This means that, for a given level of sales, FOSL is able to generate more free cash flow for investors.

Liquidity and Financial Risk

KIM’s debt-to-equity ratio is 0.94 versus a D/E of 0.89 for FOSL. KIM is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

KIM trades at a forward P/E of 25.74, a P/B of 1.31, and a P/S of 5.81, compared to a forward P/E of 78.57, a P/B of 2.72, and a P/S of 0.50 for FOSL. 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

When investing it’s crucial to distinguish between price and value. As Warren Buffet said, “price is what you pay, value is what you get”. KIM is currently priced at a 1.21% to its one-year price target of 16.53. Comparatively, FOSL is 76.18% relative to its price target of 16.50. This suggests that KIM is the better investment over the next year.

Risk and Volatility

No discussion on value is complete without taking into account risk. Analysts use a stock’s beta, which measures the volatility of a stock compared to the overall market, to measure systematic risk. A stock with a beta above 1 is more volatile than the market. Conversely, a beta below 1 implies a below average level of risk. KIM has a beta of 0.51 and FOSL’s beta is 0.08. FOSL’s shares are therefore the less volatile of the two stocks.

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. KIM has a short ratio of 4.53 compared to a short interest of 8.92 for FOSL. This implies that the market is currently less bearish on the outlook for KIM.

Summary




Kimco Realty Corporation (NYSE:KIM) beats Fossil Group, Inc. (NASDAQ:FOSL) on a total of 8 of the 14 factors compared between the two stocks. KIM is more profitable, generates a higher return on investment and has higher cash flow per share. In terms of valuation, KIM is the cheaper of the two stocks on an earnings and book value, KIM is more undervalued relative to its price target. Finally, KIM has better sentiment signals based on short interest.

Previous ArticleNext Article

Related Post

Should You Buy Achillion Pharmaceuticals, Inc. (AC... Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN) shares are up more than 7.64% this year and recently increased 1.31% or $0.04 to settle at $3.10. The Es...
iRobot Corporation (IRBT) Key Indicators And Emerg... iRobot Corporation (NYSE:IRBT) fell by -15.62% in Wednesday’s trading session from $100.87 to $85.11 The stock price went upward in 6 of the last 10 d...
How Insiders and Institutions are Trading Californ... Recent insider trends for California Resources Corporation (NYSE:CRC) have caught the attention of investors. Patters in insider activity can help ana...
Dissecting the Numbers for Tesla, Inc. (TSLA) and ... Tesla, Inc. (NASDAQ:TSLA) shares are down more than -8.31% this year and recently increased 1.71% or $4.79 to settle at $285.48. Leucadia National Cor...
Reviewing the Insider Trends for B2Gold Corp. (BTG... Recent insider trends for B2Gold Corp. (NYSE:BTG) have caught the attention of investors. Analysts monitor insider data to understand the sentiment of...