Global

A Side-by-side Analysis of CBL & Associates Properties, Inc (CBL) and Express, Inc. (EXPR)

CBL & Associates Properties, Inc (NYSE:CBL) shares are down more than -4.06% this year and recently decreased -5.73% or -$0.33 to settle at $5.43. Express, Inc. (NYSE:EXPR), on the other hand, is down -2.96% year to date as of 06/13/2018. It currently trades at $9.85 and has returned -2.48% during the past week.

CBL & Associates Properties, Inc (NYSE:CBL) and Express, Inc. (NYSE:EXPR) are the two most active stocks in the REIT – Retail industry based on today’s trading volumes. We will compare the two companies based on the strength of various metrics, including growth, profitability, risk, return, and valuation to determine if one is a better investment than the other.

Growth

The ability to grow earnings at a compound rate over time is a crucial determinant of investment value. Analysts expect CBL to grow earnings at a 4.90% annual rate over the next 5 years. Comparatively, EXPR is expected to grow at a 12.00% annual rate. All else equal, EXPR’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 5.64% for Express, Inc. (EXPR). CBL’s ROI is 5.00% while EXPR has a ROI of 2.80%. The interpretation is that CBL’s business generates a higher return on investment than EXPR’s.

Cash Flow



The value of a stock is simply the present value of its future free cash flows. CBL’s free cash flow (“FCF”) per share for the trailing twelve months was +0.32. Comparatively, EXPR’s free cash flow per share was -0.43. On a percent-of-sales basis, CBL’s free cash flow was 0.01% while EXPR converted -1.52% of its revenues into cash flow. This means that, for a given level of sales, CBL is able to generate more free cash flow for investors.

Liquidity and Financial Risk

CBL’s debt-to-equity ratio is 3.62 versus a D/E of 0.00 for EXPR. CBL is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

CBL trades at a forward P/E of 139.23, a P/B of 0.80, and a P/S of 1.00, compared to a forward P/E of 18.73, a P/B of 1.19, and a P/S of 0.36 for EXPR. CBL is the cheaper of the two stocks on book value basis but is expensive in terms of P/E and P/S ratio. 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. CBL is currently priced at a 32.76% to its one-year price target of 4.09. Comparatively, EXPR is -3.9% relative to its price target of 10.25. This suggests that EXPR 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. CBL has a beta of 1.30 and EXPR’s beta is 0.93. EXPR’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. CBL has a short ratio of 10.01 compared to a short interest of 6.62 for EXPR. This implies that the market is currently less bearish on the outlook for EXPR.

Summary




Express, Inc. (NYSE:EXPR) beats CBL & Associates Properties, Inc (NYSE:CBL) on a total of 9 of the 14 factors compared between the two stocks. EXPR is more profitable, higher liquidity and has lower financial risk. In terms of valuation, EXPR is the cheaper of the two stocks on an earnings and sales basis, EXPR is more undervalued relative to its price target. Finally, EXPR has better sentiment signals based on short interest.

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