Twenty-First Century Fox, Inc. (NASDAQ:FOXA) shares are up more than 26.44% this year and recently increased 7.70% or $3.12 to settle at $43.66. Twenty-First Century Fox, Inc. (NASDAQ:FOX), on the other hand, is up 27.23% year to date as of 06/13/2018. It currently trades at $43.41 and has returned 11.74% during the past week.
Twenty-First Century Fox, Inc. (NASDAQ:FOXA) and Twenty-First Century Fox, Inc. (NASDAQ:FOX) are the two most active stocks in the Entertainment – Diversified 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 grow earnings at a compound rate over time is a crucial determinant of investment value. Analysts expect FOXA to grow earnings at a 10.55% annual rate over the next 5 years. Comparatively, FOX is expected to grow at a 10.40% annual rate. All else equal, FOXA’s higher growth rate would imply a greater potential for capital appreciation.Profitability and Returns
Just, if not more, important than the growth rate is the quality of that growth. Growth can actual be harmful to investors if it comes at the cost of weak profitability and low returns. 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 25.98% for Twenty-First Century Fox, Inc. (FOX).Cash Flow
Earnings don’t always accurately reflect the amount of cash that a company brings in. FOXA’s free cash flow (“FCF”) per share for the trailing twelve months was +0.82. Comparatively, FOX’s free cash flow per share was +0.82. On a percent-of-sales basis, FOXA’s free cash flow was 5.33% while FOX converted 5.33% of its revenues into cash flow. This means that, for a given level of sales, FOXA is able to generate more free cash flow for investors.Valuation
FOXA trades at a forward P/E of 19.47, a P/B of 4.26, and a P/S of 2.71, compared to a forward P/E of 19.29, a P/B of 4.24, for FOX. FOXA is the expensive 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
A cheap stock is not necessarily a value stock. Most of the time, a stock is cheap for good reason. A stock only has value if the current price is substantially below the price at which it should trade in the future. FOXA is currently priced at a 8.07% to its one-year price target of 40.40. Comparatively, FOX is -3.53% relative to its price target of 45.00. This suggests that FOX is the better investment over the next year.
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. FOXA has a short ratio of 1.90 compared to a short interest of 2.58 for FOX. This implies that the market is currently less bearish on the outlook for FOXA.Summary
Twenty-First Century Fox, Inc. (NASDAQ:FOX) beats Twenty-First Century Fox, Inc. (NASDAQ:FOXA) on a total of 8 of the 14 factors compared between the two stocks. FOX is growing fastly and has lower financial risk. In terms of valuation, FOX is the cheaper of the two stocks on an earnings, book value and sales basis, FOX is more undervalued relative to its price target. Finally, CF has better sentiment signals based on short interest.