Comerica Incorporated (NYSE:CMA) shares are up more than 10.45% this year and recently increased 0.11% or $0.11 to settle at $95.88. FMC Corporation (NYSE:FMC), on the other hand, is down -5.01% year to date as of 06/13/2018. It currently trades at $89.92 and has returned -1.06% during the past week.
Comerica Incorporated (NYSE:CMA) and FMC Corporation (NYSE:FMC) are the two most active stocks in the Money Center Banks 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
Companies that can increase earnings at a high compound rate over time are attractive to investors. Analysts expect CMA to grow earnings at a 26.85% annual rate over the next 5 years. Comparatively, FMC is expected to grow at a 22.43% annual rate. All else equal, CMA’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 19.09% for FMC Corporation (FMC). CMA’s ROI is 12.70% while FMC has a ROI of 5.40%. The interpretation is that CMA’s business generates a higher return on investment than FMC’s.Cash Flow
The amount of free cash flow available to investors is ultimately what determines the value of a stock. CMA’s free cash flow (“FCF”) per share for the trailing twelve months was +1.63. Comparatively, FMC’s free cash flow per share was -0.92. On a percent-of-sales basis, CMA’s free cash flow was 8.52% while FMC converted -4.3% of its revenues into cash flow. This means that, for a given level of sales, CMA is able to generate more free cash flow for investors.Liquidity and Financial Risk
CMA’s debt-to-equity ratio is 0.70 versus a D/E of 1.11 for FMC. FMC is therefore the more solvent of the two companies, and has lower financial risk.
CMA trades at a forward P/E of 12.81, a P/B of 2.06, and a P/S of 7.31, compared to a forward P/E of 13.20, a P/B of 4.05, and a P/S of 3.55 for FMC. 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. CMA is currently priced at a -8.06% to its one-year price target of 104.29. Comparatively, FMC is -14.06% relative to its price target of 104.63. This suggests that FMC is the better investment over the next year.
Risk and Volatility
To gauge the market risk of a particular stock, investors use beta. Stocks with a beta above 1 are more volatile than the market as a whole. Conversely, a beta below 1 implies below average systematic risk. CMA has a beta of 1.38 and FMC’s beta is 1.64. CMA’s shares are therefore the less volatile of the two stocks.Insider Activity and Investor Sentiment
Short interest is another tool that analysts use to gauge investor sentiment. It represents the percentage of a stock’s tradable shares that are being shorted. CMA has a short ratio of 2.95 compared to a short interest of 2.08 for FMC. This implies that the market is currently less bearish on the outlook for FMC.Summary
Comerica Incorporated (NYSE:CMA) beats FMC Corporation (NYSE:FMC) on a total of 9 of the 14 factors compared between the two stocks. CMA is growing fastly, is more profitable, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate and has lower financial risk. In terms of valuation, CMA is the cheaper of the two stocks on an earnings and book value, Finally, EIX has better sentiment signals based on short interest.