Markets

Critical Comparison: Liberty TripAdvisor Holdings, Inc. (LTRPA) vs. Malibu Boats, Inc. (MBUU)

Liberty TripAdvisor Holdings, Inc. (NASDAQ:LTRPA) and Malibu Boats, Inc. (NASDAQ:MBUU) are the two most active stocks in the Recreational Goods, Other industry based on today’s trading volumes. Investor interest in the two stocks is clearly very high, but which is the better investment? To answer this question, we will compare the two companies across growth, profitability, risk, and valuation metrics, and also examine their analyst ratings and insider activity trends.

Profitability and Returns

A high growth rate isn’t necessarily valuable to investors. In fact, companies that overinvest in low return projects just to achieve a high growth rate can actually destroy shareholder value. Profitability and returns are a measure of the quality of a company’s business and its growth opportunities. We’ll use EBITDA margin and Return on Investment (ROI) to measure this. Liberty TripAdvisor Holdings, Inc. (LTRPA) has an EBITDA margin of 18.71%, compared to an EBITDA margin of 16.75% for Malibu Boats, Inc. (MBUU). This suggests that LTRPA underlying business is more profitable. LTRPA’s ROI is 1.70% while MBUU has a ROI of 27.90%. The interpretation is that MBUU’s business generates a higher return on investment than LTRPA’s.

Cash Flow 



Earnings don’t always accurately reflect the amount of cash that a company brings in. LTRPA’s free cash flow (“FCF”) per share for the trailing twelve months was +2.63. Comparatively, MBUU’s free cash flow per share was +0.38. On a percent-of-sales basis, LTRPA’s free cash flow was 12.38% while MBUU converted 0% of its revenues into cash flow. This means that, for a given level of sales, LTRPA 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. LTRPA has a current ratio of 1.90 compared to 1.60 for MBUU. This means that LTRPA can more easily cover its most immediate liabilities over the next twelve months. LTRPA’s debt-to-equity ratio is 0.93 versus a D/E of 1.42 for MBUU. MBUU is therefore the more solvent of the two companies, and has lower financial risk.




Valuation

LTRPA trades at a forward P/B of 1.17, and a P/S of 0.58, compared to a forward P/E of 13.96, a P/B of 11.93, and a P/S of 1.71 for MBUU. 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. LTRPA is currently priced at a -31.17% to its one-year price target of $17.87. Comparatively, MBUU is -7.11% relative to its price target of $28.00. This suggests that LTRPA is the better investment over the next year.

The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 3.00 for LTRPA and 1.80 for MBUU, which implies that analysts are more bullish on the outlook for LTRPA.

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. MBUU’s beta is 1.05.

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. LTRPA has a short ratio of 3.24 compared to a short interest of 10.05 for MBUU. This implies that the market is currently less bearish on the outlook for LTRPA.

Summary

Liberty TripAdvisor Holdings, Inc. (NASDAQ:LTRPA) beats Malibu Boats, Inc. (NASDAQ:MBUU) on a total of 9 of the 11 factors compared between the two stocks. LTRPA 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, LTRPA is the cheaper of the two stocks on book value and sales basis, LTRPA is more undervalued relative to its price target. Finally, LTRPA has better sentiment signals based on short interest.

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