Cousins Properties Incorporated (NYSE:CUZ) shares are down more than -7.46% this year and recently decreased -1.38% or -$0.12 to settle at $8.56. BB&T Corporation (NYSE:BBT), on the other hand, is up 11.48% year to date as of 03/13/2018. It currently trades at $55.38 and has returned 0.24% during the past week.
Cousins Properties Incorporated (NYSE:CUZ) and BB&T Corporation (NYSE:BBT) are the two most active stocks in the market 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.
The ability to grow earnings at a compound rate over time is a crucial determinant of investment value. Comparatively, BBT is expected to grow at a 7.05% annual rate. All else equal, BBT’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 43.78% for BB&T Corporation (BBT).
If there’s one thing investors care more about than earnings, it’s cash flow. CUZ’s free cash flow (“FCF”) per share for the trailing twelve months was -0.15. Comparatively, BBT’s free cash flow per share was -. On a percent-of-sales basis, CUZ’s free cash flow was -0.01% while BBT converted 0% of its revenues into cash flow. This means that, for a given level of sales, BBT is able to generate more free cash flow for investors.
CUZ’s debt-to-equity ratio is 0.40 versus a D/E of 0.80 for BBT. BBT is therefore the more solvent of the two companies, and has lower financial risk.
CUZ trades at a forward P/E of 77.82, a P/B of 1.30, and a P/S of 7.67, compared to a forward P/E of 13.03, a P/B of 1.63, and a P/S of 5.82 for BBT. CUZ 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. CUZ is currently priced at a -11.48% to its one-year price target of 9.67. Comparatively, BBT is -3.59% relative to its price target of 57.44. This suggests that CUZ 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 1.80 for CUZ and 2.50 for BBT, which implies that analysts are more bullish on the outlook for BBT.
Risk and Volatility
No discussion on value is complete without taking into account risk. Analysts use a stock’s beta, which measures the volatility of a stock compared to the overall market, to measure systematic risk. A stock with a beta above 1 is more volatile than the market. Conversely, a beta below 1 implies a below average level of risk. CUZ has a beta of 0.93 and BBT’s beta is 1.02. CUZ’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. CUZ has a short ratio of 5.39 compared to a short interest of 2.20 for BBT. This implies that the market is currently less bearish on the outlook for BBT.
BB&T Corporation (NYSE:BBT) beats Cousins Properties Incorporated (NYSE:CUZ) on a total of 8 of the 14 factors compared between the two stocks. BBT higher liquidity, is more profitable, generates a higher return on investment, has higher cash flow per share and has a higher cash conversion rate. In terms of valuation, BBT is the cheaper of the two stocks on an earnings and sales basis, Finally, BBT has better sentiment signals based on short interest.