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A Side-by-side Analysis of Voya Financial, Inc. (VOYA) and Beacon Roofing Supply, Inc. (BECN)

Voya Financial, Inc. (NYSE:VOYA) shares are up more than 5.24% this year and recently decreased -1.88% or -$1 to settle at $52.06. Beacon Roofing Supply, Inc. (NASDAQ:BECN), on the other hand, is down -32.21% year to date as of 06/13/2018. It currently trades at $43.22 and has returned 1.53% during the past week.

Voya Financial, Inc. (NYSE:VOYA) and Beacon Roofing Supply, Inc. (NASDAQ:BECN) are the two most active stocks in the Asset Management industry based on today’s trading volumes. Investors are clearly interested in the two names, but is one a better choice than the other? We will compare the two companies across growth, profitability, risk, valuation, and insider trends to answer this question.

Growth

The ability to grow earnings at a compound rate over time is a crucial determinant of investment value. Analysts expect VOYA to grow earnings at a 45.40% annual rate over the next 5 years. Comparatively, BECN is expected to grow at a 15.00% annual rate. All else equal, VOYA’s higher growth rate would imply a greater potential for capital appreciation.

Profitability and Returns

Growth doesn’t mean much if it comes at the cost of weak profitability. To adjust for differences in capital structure we’ll use EBITDA margin and Return on Investment (ROI) as measures of profitability and return. , compared to an EBITDA margin of 6.03% for Beacon Roofing Supply, Inc. (BECN). VOYA’s ROI is 3.30% while BECN has a ROI of 6.00%. The interpretation is that BECN’s business generates a higher return on investment than VOYA’s.

Cash Flow



The value of a stock is simply the present value of its future free cash flows. VOYA’s free cash flow (“FCF”) per share for the trailing twelve months was +2.32. Comparatively, BECN’s free cash flow per share was +0.93. On a percent-of-sales basis, VOYA’s free cash flow was 4.54% while BECN converted 1.45% of its revenues into cash flow. This means that, for a given level of sales, VOYA is able to generate more free cash flow for investors.

Liquidity and Financial Risk

VOYA’s debt-to-equity ratio is 0.37 versus a D/E of 1.66 for BECN. BECN is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

VOYA trades at a forward P/E of 9.86, a P/B of 0.96, and a P/S of 1.07, compared to a forward P/E of 9.69, a P/B of 1.65, and a P/S of 0.58 for BECN. VOYA 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

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.

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. VOYA has a beta of 1.50 and BECN’s beta is 1.31. BECN’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. VOYA has a short ratio of 6.86 compared to a short interest of 2.49 for BECN. This implies that the market is currently less bearish on the outlook for BECN.

Summary




Voya Financial, Inc. (NYSE:VOYA) beats Beacon Roofing Supply, Inc. (NASDAQ:BECN) on a total of 7 of the 13 factors compared between the two stocks. VOYA is growing fastly, is more profitable, has higher cash flow per share, has a higher cash conversion rate and has lower financial risk. Finally, AA has better sentiment signals based on short interest.

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