Tyson Foods, Inc. (NYSE:TSN) shares are down more than -13.11% this year and recently decreased -1.45% or -$1.04 to settle at $70.44. STORE Capital Corporation (NYSE:STOR), on the other hand, is up 2.19% year to date as of 06/13/2018. It currently trades at $26.61 and has returned -0.63% during the past week.
Tyson Foods, Inc. (NYSE:TSN) and STORE Capital Corporation (NYSE:STOR) are the two most active stocks in the Meat Products 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
One of the key things investors look for in a company is the ability to grow earnings at a high compound rate over time. Analysts expect TSN to grow earnings at a 3.60% annual rate over the next 5 years. Comparatively, STOR is expected to grow at a 5.87% annual rate. All else equal, STOR’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 89.89% for STORE Capital Corporation (STOR). TSN’s ROI is 10.00% while STOR has a ROI of 4.20%. The interpretation is that TSN’s business generates a higher return on investment than STOR’s.Cash Flow
If there’s one thing investors care more about than earnings, it’s cash flow. TSN’s free cash flow (“FCF”) per share for the trailing twelve months was -0.99. Comparatively, STOR’s free cash flow per share was +0.14. On a percent-of-sales basis, TSN’s free cash flow was -0.95% while STOR converted 0.01% of its revenues into cash flow. This means that, for a given level of sales, STOR is able to generate more free cash flow for investors.Liquidity and Financial Risk
TSN’s debt-to-equity ratio is 0.82 versus a D/E of 0.84 for STOR. STOR is therefore the more solvent of the two companies, and has lower financial risk.
TSN trades at a forward P/E of 10.33, a P/B of 2.12, and a P/S of 0.62, compared to a forward P/E of 28.52, a P/B of 1.59, and a P/S of 11.15 for STOR. 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
A cheap stock is not necessarily a value stock. Most of the time, a stock is cheap for good reason. A stock only has value if the current price is substantially below the price at which it should trade in the future. TSN is currently priced at a -11.95% to its one-year price target of 80.00. Comparatively, STOR is -3.24% relative to its price target of 27.50. This suggests that TSN 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. TSN has a beta of 0.19 and STOR’s beta is 0.17. STOR’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. TSN has a short ratio of 3.31 compared to a short interest of 3.21 for STOR. This implies that the market is currently less bearish on the outlook for STOR.Summary
STORE Capital Corporation (NYSE:STOR) beats Tyson Foods, Inc. (NYSE:TSN) on a total of 8 of the 14 factors compared between the two stocks. STOR generates a higher return on investment, is more profitable, has higher cash flow per share and has a higher cash conversion rate. Finally, STOR has better sentiment signals based on short interest.