Twenty-First Century Fox, Inc. (NASDAQ:FOXA) shares are up more than 7.27% this year and recently increased 0.68% or $0.25 to settle at $37.04. Old Republic International Corporation (NYSE:ORI), on the other hand, is up 7.32% year to date as of 04/16/2018. It currently trades at $21.84 and has returned 3.51% during the past week.
Twenty-First Century Fox, Inc. (NASDAQ:FOXA) and Old Republic International Corporation (NYSE:ORI) are the two most active stocks in the Entertainment – Diversified 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
Companies that can increase earnings at a high compound rate over time are attractive to investors. Analysts expect FOXA to grow earnings at a 10.60% annual rate over the next 5 years.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 11.58% for Old Republic International Corporation (ORI). FOXA’s ROI is 9.20% while ORI has a ROI of 11.10%. The interpretation is that ORI’s business generates a higher return on investment than FOXA’s.Cash Flow
The value of a stock is simply the present value of its future free cash flows. FOXA’s free cash flow (“FCF”) per share for the trailing twelve months was -0.46. Comparatively, ORI’s free cash flow per share was -0.40. On a percent-of-sales basis, FOXA’s free cash flow was -2.99% while ORI converted -1.72% of its revenues into cash flow. This means that, for a given level of sales, ORI is able to generate more free cash flow for investors.Liquidity and Financial Risk
FOXA’s debt-to-equity ratio is 1.08 versus a D/E of 0.31 for ORI. FOXA is therefore the more solvent of the two companies, and has lower financial risk.
FOXA trades at a forward P/E of 16.27, a P/B of 3.73, and a P/S of 2.31, compared to a forward P/E of 11.30, a P/B of 1.22, and a P/S of 0.94 for ORI. FOXA is the expensive 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
Investors often compare a stock’s current price to an analyst price target to get a sense of the potential upside within the next year. FOXA is currently priced at a -9.33% to its one-year price target of 40.85. Comparatively, ORI is -9% relative to its price target of 24.00. This suggests that FOXA is the better investment over the next year.
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. FOXA has a beta of 1.33 and ORI’s beta is 1.27. ORI’s shares are therefore the less volatile of the two stocks.Insider Activity and Investor Sentiment
Short interest is another tool that analysts use to gauge investor sentiment. It represents the percentage of a stock’s tradable shares that are being shorted. FOXA has a short ratio of 1.93 compared to a short interest of 2.08 for ORI. This implies that the market is currently less bearish on the outlook for FOXA.Summary
Old Republic International Corporation (NYSE:ORI) beats Twenty-First Century Fox, Inc. (NASDAQ:FOXA) on a total of 9 of the 14 factors compared between the two stocks. ORI is growing fastly, has higher cash flow per share, has a higher cash conversion rate and has lower financial risk. In terms of valuation, ORI is the cheaper of the two stocks on an earnings, book value and sales basis, Finally, CVE has better sentiment signals based on short interest.