HD Supply Holdings, Inc. (NASDAQ:HDS) shares are up more than 6.55% this year and recently decreased -1.34% or -$0.58 to settle at $42.65. CoreLogic, Inc. (NYSE:CLGX), on the other hand, is up 18.46% year to date as of 06/13/2018. It currently trades at $54.74 and has returned 0.29% during the past week.
HD Supply Holdings, Inc. (NASDAQ:HDS) and CoreLogic, Inc. (NYSE:CLGX) are the two most active stocks in the Industrial Equipment Wholesale 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 HDS to grow earnings at a 8.70% annual rate over the next 5 years. Comparatively, CLGX is expected to grow at a 12.00% annual rate. All else equal, CLGX’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 16.39% for CoreLogic, Inc. (CLGX). HDS’s ROI is 11.00% while CLGX has a ROI of 6.40%. The interpretation is that HDS’s business generates a higher return on investment than CLGX’s.Cash Flow
The amount of free cash flow available to investors is ultimately what determines the value of a stock. HDS’s free cash flow (“FCF”) per share for the trailing twelve months was +0.17. Comparatively, CLGX’s free cash flow per share was +1.09. On a percent-of-sales basis, HDS’s free cash flow was 0.61% while CLGX converted 4.81% of its revenues into cash flow. This means that, for a given level of sales, CLGX 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. HDS has a current ratio of 2.20 compared to 0.70 for CLGX. This means that HDS can more easily cover its most immediate liabilities over the next twelve months. HDS’s debt-to-equity ratio is 1.41 versus a D/E of 1.70 for CLGX. CLGX is therefore the more solvent of the two companies, and has lower financial risk.Valuation
HDS trades at a forward P/E of 13.13, a P/B of 5.27, and a P/S of 1.50, compared to a forward P/E of 17.99, a P/B of 4.41, and a P/S of 2.40 for CLGX. 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
When investing it’s crucial to distinguish between price and value. As Warren Buffet said, “price is what you pay, value is what you get”. HDS is currently priced at a -9.26% to its one-year price target of 47.00. Comparatively, CLGX is 10.59% relative to its price target of 49.50. This suggests that HDS 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. HDS has a beta of 1.25 and CLGX’s beta is 0.86. CLGX’s shares are therefore the less volatile of the two stocks.Insider Activity and Investor Sentiment
Comparing the number of shares sold short to the float is a method analysts often use to get a reading on investor sentiment. HDS has a short ratio of 2.01 compared to a short interest of 5.11 for CLGX. This implies that the market is currently less bearish on the outlook for HDS.Summary
HD Supply Holdings, Inc. (NASDAQ:HDS) beats CoreLogic, Inc. (NYSE:CLGX) on a total of 8 of the 14 factors compared between the two stocks. HDS generates a higher return on investment, higher liquidity and has lower financial risk. In terms of valuation, HDS is the cheaper of the two stocks on an earnings and sales basis, HDS is more undervalued relative to its price target. Finally, HDS has better sentiment signals based on short interest.