Post Holdings, Inc. (NYSE:POST) shares are up more than 3.55% this year and recently increased 3.85% or $3.04 to settle at $82.04. Amplify Snack Brands, Inc. (NYSE:BETR), on the other hand, is up 0.67% year to date as of 01/10/2018. It currently trades at $12.09 and has returned -1.47% during the past week.
Post Holdings, Inc. (NYSE:POST) and Amplify Snack Brands, Inc. (NYSE:BETR) are the two most active stocks in the Food – Major Diversified 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.
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 POST to grow earnings at a 17.10% annual rate over the next 5 years. Comparatively, BETR is expected to grow at a 25.00% annual rate. All else equal, BETR’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 21.94% for Amplify Snack Brands, Inc. (BETR). POST’s ROI is 2.70% while BETR has a ROI of 6.80%. The interpretation is that BETR’s business generates a higher return on investment than POST’s.
The amount of free cash flow available to investors is ultimately what determines the value of a stock. POST’s free cash flow (“FCF”) per share for the trailing twelve months was +1.61. Comparatively, BETR’s free cash flow per share was -0.09. On a percent-of-sales basis, POST’s free cash flow was 2.04% while BETR converted -0% of its revenues into cash flow. This means that, for a given level of sales, POST 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. POST has a current ratio of 3.70 compared to 1.30 for BETR. This means that POST can more easily cover its most immediate liabilities over the next twelve months. POST’s debt-to-equity ratio is 2.58 versus a D/E of 6.62 for BETR. BETR is therefore the more solvent of the two companies, and has lower financial risk.
POST trades at a forward P/E of 18.34, a P/B of 1.96, and a P/S of 1.04, compared to a forward P/E of 43.49, a P/B of 10.42, and a P/S of 2.52 for BETR. POST 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
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”. POST is currently priced at a -19.57% to its one-year price target of 102.00. Comparatively, BETR is 95.95% relative to its price target of 6.17. This suggests that POST 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 1.60 for POST and 2.80 for BETR, which implies that analysts are more bullish on the outlook for BETR.
Insider Activity and Investor Sentiment
The analysis of insider buying and selling trends can be extended to the aggregate level. Short interest, which represents the percentage of a stock’s tradable shares currently being shorted, captures what the market as a whole feels about a stock. POST has a short ratio of 9.62 compared to a short interest of 5.14 for BETR. This implies that the market is currently less bearish on the outlook for BETR.
Post Holdings, Inc. (NYSE:POST) beats Amplify Snack Brands, Inc. (NYSE:BETR) on a total of 9 of the 14 factors compared between the two stocks. POST has higher cash flow per share, has a higher cash conversion rate, higher liquidity and has lower financial risk. In terms of valuation, POST is the cheaper of the two stocks on an earnings, book value and sales basis, POST is more undervalued relative to its price target. Finally, HAIN has better sentiment signals based on short interest.