MetLife, Inc. (NYSE:MET) shares are down more than -6.84% this year and recently increased 0.17% or $0.08 to settle at $47.10. The Boeing Company (NYSE:BA), on the other hand, is up 14.84% year to date as of 03/13/2018. It currently trades at $338.67 and has returned -2.94% during the past week.
MetLife, Inc. (NYSE:MET) and The Boeing Company (NYSE:BA) are the two most active stocks in the market based on today’s trading volumes. We will compare the two companies based on the strength of various metrics, including growth, profitability, risk, return, and valuation to determine if one is a better investment than the other.
Companies that can consistently grow earnings at a high compound rate usually have the greatest potential to create value for shareholders in the long-run. Analysts expect MET to grow earnings at a 10.00% annual rate over the next 5 years. Comparatively, BA is expected to grow at a 15.89% annual rate. All else equal, BA’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 13.36% for The Boeing Company (BA). MET’s ROI is 7.50% while BA has a ROI of 64.30%. The interpretation is that BA’s business generates a higher return on investment than MET’s.
If there’s one thing investors care more about than earnings, it’s cash flow. On a percent-of-sales basis, MET’s free cash flow was 0% while BA converted 1.7% of its revenues into cash flow. This means that, for a given level of sales, BA is able to generate more free cash flow for investors.
Liquidity and Financial Risk
MET’s debt-to-equity ratio is 0.33 versus a D/E of 31.32 for BA. BA is therefore the more solvent of the two companies, and has lower financial risk.
MET trades at a forward P/E of 8.73, a P/B of 0.84, and a P/S of 0.78, compared to a forward P/E of 20.31, a P/B of 564.45, and a P/S of 2.16 for BA. MET 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
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. MET is currently priced at a -14.15% to its one-year price target of 54.86. Comparatively, BA is -12.44% relative to its price target of 386.78. This suggests that MET 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 2.40 for MET and 2.10 for BA, which implies that analysts are more bullish on the outlook for MET.
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. MET has a beta of 1.26 and BA’s beta is 1.34. MET’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. MET has a short ratio of 1.76 compared to a short interest of 1.11 for BA. This implies that the market is currently less bearish on the outlook for BA.
The Boeing Company (NYSE:BA) beats MetLife, Inc. (NYSE:MET) on a total of 8 of the 14 factors compared between the two stocks. BA has lower financial risk, is more profitable, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate and higher liquidity. In terms of valuation, MET is the cheaper of the two stocks on an earnings, book value and sales basis, Finally, BA has better sentiment signals based on short interest.