Finance

Comparing Dollar Tree, Inc. (DLTR) and Coeur Mining, Inc. (CDE)

Dollar Tree, Inc. (NASDAQ:DLTR) shares are down more than -18.01% this year and recently increased 1.61% or $1.39 to settle at $87.98. Coeur Mining, Inc. (NYSE:CDE), on the other hand, is up 7.07% year to date as of 06/13/2018. It currently trades at $8.03 and has returned 2.69% during the past week.

Dollar Tree, Inc. (NASDAQ:DLTR) and Coeur Mining, Inc. (NYSE:CDE) are the two most active stocks in the Discount, Variety Stores 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

Companies that can consistently grow earnings at a high compound rate usually have the greatest potential to create value for shareholders in the long-run. Analysts expect DLTR to grow earnings at a 13.48% annual rate over the next 5 years.

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 25.59% for Coeur Mining, Inc. (CDE). DLTR’s ROI is 11.20% while CDE has a ROI of 1.90%. The interpretation is that DLTR’s business generates a higher return on investment than CDE’s.

Cash Flow



If there’s one thing investors care more about than earnings, it’s cash flow. DLTR’s free cash flow (“FCF”) per share for the trailing twelve months was +0.87. Comparatively, CDE’s free cash flow per share was -0.16. On a percent-of-sales basis, DLTR’s free cash flow was 0.93% while CDE converted -0% of its revenues into cash flow. This means that, for a given level of sales, DLTR is able to generate more free cash flow for investors.

Liquidity and Financial Risk

Liquidity and leverage ratios provide insight into the financial health of a company, and allow investors to determine the likelihood that the company will be able to continue operating as a going concern. DLTR has a current ratio of 2.10 compared to 2.10 for CDE. This means that DLTR can more easily cover its most immediate liabilities over the next twelve months. DLTR’s debt-to-equity ratio is 0.70 versus a D/E of 0.51 for CDE. DLTR is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

DLTR trades at a forward P/E of 14.04, a P/B of 2.84, and a P/S of 0.92, compared to a forward P/E of 25.17, a P/B of 1.82, and a P/S of 2.19 for CDE. 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

Just because a stock is cheaper doesn’t mean there’s more value to be had. In order to assess value we need to compare the current price to where it’s likely to trade in the future. DLTR is currently priced at a -15.67% to its one-year price target of 104.33. Comparatively, CDE is -22.86% relative to its price target of 10.41. This suggests that CDE is the better investment over the next year.

Risk and Volatility

Beta is a metric that investors frequently use to analyze a stock’s systematic risk. A beta above 1 implies above average market volatility. Conversely, a stock with a beta below 1 is seen as less risky than the overall market. DLTR has a beta of 0.81 and CDE’s beta is 0.58. CDE’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. DLTR has a short ratio of 1.76 compared to a short interest of 2.58 for CDE. This implies that the market is currently less bearish on the outlook for DLTR.

Summary

Dollar Tree, Inc. (NASDAQ:DLTR) beats Coeur Mining, Inc. (NYSE:CDE) on a total of 9 of the 14 factors compared between the two stocks. DLTR is growing fastly, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate and higher liquidity. In terms of valuation, DLTR is the cheaper of the two stocks on an earnings and sales basis, Finally, DLTR has better sentiment signals based on short interest.

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