Park Hotels & Resorts Inc. (NYSE:PK) shares are up more than 4.87% this year and recently decreased -1.76% or -$0.54 to settle at $30.15. Oceaneering International, Inc. (NYSE:OII), on the other hand, is up 14.00% year to date as of 06/13/2018. It currently trades at $24.10 and has returned 1.22% during the past week.
Park Hotels & Resorts Inc. (NYSE:PK) and Oceaneering International, Inc. (NYSE:OII) are the two most active stocks in the Lodging 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
The ability to consistently grow earnings at a high compound rate is a defining characteristic of the best companies for long-term investment. Analysts expect PK to grow earnings at a -0.90% annual rate over the next 5 years. Comparatively, OII is expected to grow at a 13.00% annual rate. All else equal, OII’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 11.63% for Oceaneering International, Inc. (OII). PK’s ROI is 3.80% while OII has a ROI of 0.20%. The interpretation is that PK’s business generates a higher return on investment than OII’s.Cash Flow
Cash is king when it comes to investing. PK’s free cash flow (“FCF”) per share for the trailing twelve months was -0.61. Comparatively, OII’s free cash flow per share was -0.19. On a percent-of-sales basis, PK’s free cash flow was -4.39% while OII converted -0.97% of its revenues into cash flow. This means that, for a given level of sales, OII is able to generate more free cash flow for investors.Liquidity and Financial Risk
PK’s debt-to-equity ratio is 0.51 versus a D/E of 0.48 for OII. PK is therefore the more solvent of the two companies, and has lower financial risk.
PK trades at a forward P/E of 22.98, a P/B of 1.10, and a P/S of 2.21, compared to a P/B of 1.45, and a P/S of 1.25 for OII. PK is the cheaper of the two stocks on book value basis but is expensive in terms of P/E and P/S ratio. 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. PK is currently priced at a -2.62% to its one-year price target of 30.96. Comparatively, OII is 17.91% relative to its price target of 20.44. This suggests that PK is the better investment over the next year.
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. PK has a short ratio of 4.52 compared to a short interest of 7.63 for OII. This implies that the market is currently less bearish on the outlook for PK.Summary
Oceaneering International, Inc. (NYSE:OII) beats Park Hotels & Resorts Inc. (NYSE:PK) on a total of 7 of the 14 factors compared between the two stocks. OII is more profitable, has higher cash flow per share, has a higher cash conversion rate, higher liquidity and has lower financial risk. In terms of valuation, OII is the cheaper of the two stocks on an earnings and sales basis, Finally, CAT has better sentiment signals based on short interest.