Global

Francesca’s Holdings Corporation (FRAN) vs. Chart Industries, Inc. (GTLS): Comparing the Apparel Stores Industry’s Most Active Stocks

Francesca’s Holdings Corporation (NASDAQ:FRAN) shares are down more than -15.60% this year and recently decreased -5.80% or -$0.38 to settle at $6.17. Chart Industries, Inc. (NASDAQ:GTLS), on the other hand, is up 46.48% year to date as of 06/13/2018. It currently trades at $68.64 and has returned -2.17% during the past week.

Francesca’s Holdings Corporation (NASDAQ:FRAN) and Chart Industries, Inc. (NASDAQ:GTLS) are the two most active stocks in the Apparel Stores 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 FRAN to grow earnings at a 10.00% annual rate over the next 5 years. Comparatively, GTLS is expected to grow at a 28.80% annual rate. All else equal, GTLS’s higher growth rate would imply a greater potential for capital appreciation.

Profitability and Returns

Growth in and of itself is not necessarily valuable, and it can even be harmful to shareholders if companies overinvest in unprofitable projects in pursuit of that growth. We will use EBITDA margin and Return on Investment (ROI), which adjust for differences in capital structure, as measure of profitability and return. , compared to an EBITDA margin of 8.36% for Chart Industries, Inc. (GTLS). FRAN’s ROI is 16.60% while GTLS has a ROI of 2.40%. The interpretation is that FRAN’s business generates a higher return on investment than GTLS’s.

Cash Flow



The amount of free cash flow available to investors is ultimately what determines the value of a stock. FRAN’s free cash flow (“FCF”) per share for the trailing twelve months was -0.16. Comparatively, GTLS’s free cash flow per share was +0.52. On a percent-of-sales basis, FRAN’s free cash flow was -0% while GTLS converted 0% of its revenues into cash flow. This means that, for a given level of sales, FRAN is able to generate more free cash flow for investors.

Liquidity and Financial Risk

Liquidity and leverage ratios measure a company’s ability to meet short-term obligations and longer-term debts. FRAN has a current ratio of 2.20 compared to 1.70 for GTLS. This means that FRAN can more easily cover its most immediate liabilities over the next twelve months. FRAN’s debt-to-equity ratio is 0.00 versus a D/E of 0.62 for GTLS. GTLS is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

FRAN trades at a forward P/E of 9.98, a P/B of 1.96, and a P/S of 0.45, compared to a forward P/E of 26.28, a P/B of 2.57, and a P/S of 1.91 for GTLS. FRAN is the cheaper 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

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. FRAN is currently priced at a -15.83% to its one-year price target of 7.33. Comparatively, GTLS is -1% relative to its price target of 69.33. This suggests that FRAN 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. FRAN has a beta of 0.06 and GTLS’s beta is 1.08. FRAN’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. FRAN has a short ratio of 4.76 compared to a short interest of 7.55 for GTLS. This implies that the market is currently less bearish on the outlook for FRAN.

Summary

Francesca’s Holdings Corporation (NASDAQ:FRAN) beats Chart Industries, Inc. (NASDAQ:GTLS) on a total of 10 of the 14 factors compared between the two stocks. FRAN is more profitable, generates a higher return on investment, higher liquidity and has lower financial risk. In terms of valuation, FRAN is the cheaper of the two stocks on an earnings, book value and sales basis, FRAN is more undervalued relative to its price target. Finally, FRAN has better sentiment signals based on short interest.

Previous ArticleNext Article

Related Post

Should You Buy PPL Corporation (PPL) or Hilton Gra... PPL Corporation (NYSE:PPL) shares are down more than -8.63% this year and recently increased 0.32% or $0.09 to settle at $28.28. Hilton Grand Vacation...
Deere & Company (DE) vs. The Manitowoc Compan... Deere & Company (NYSE:DE) and The Manitowoc Company, Inc. (NYSE:MTW) are the two most active stocks in the Farm & Construction Machinery indus...
Should You Buy Hewlett Packard Enterprise Company ... Hewlett Packard Enterprise Company (NYSE:HPE) shares are up more than 9.75% this year and recently increased 1.16% or $0.18 to settle at $15.76. Sarep...
Bio-Path Holdings, Inc. (BPTH) Technical Analysis ... Bio-Path Holdings, Inc. (NASDAQ:BPTH) gained 7.47% in Friday’s trading session, going up from its prior closing price of $0.38 to $0.41, and has now r...
Cenovus Energy Inc. (CVE) vs. TransEnterix, Inc. (... Cenovus Energy Inc. (NYSE:CVE) shares are up more than 2.52% this year and recently decreased -1.37% or -$0.13 to settle at $9.36. TransEnterix, Inc. ...