Wells Fargo & Company (NYSE:WFC) shares are down more than -16.27% this year and recently decreased -0.18% or -$0.09 to settle at $50.80. Comcast Corporation (NASDAQ:CMCSA), on the other hand, is down -16.28% year to date as of 04/16/2018. It currently trades at $33.53 and has returned -1.24% during the past week.
Wells Fargo & Company (NYSE:WFC) and Comcast Corporation (NASDAQ:CMCSA) are the two most active stocks in the Money Center Banks industry 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.Growth
Companies that can increase earnings at a high compound rate over time are attractive to investors. Analysts expect WFC to grow earnings at a 9.37% annual rate over the next 5 years. Comparatively, CMCSA is expected to grow at a 16.50% annual rate. All else equal, CMCSA’s higher growth rate would imply a greater potential for capital appreciation.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., compared to an EBITDA margin of 21.78% for Comcast Corporation (CMCSA). WFC’s ROI is 9.80% while CMCSA has a ROI of 9.70%. The interpretation is that WFC’s business generates a higher return on investment than CMCSA’s.Cash Flow
If there’s one thing investors care more about than earnings, it’s cash flow. On a percent-of-sales basis, WFC’s free cash flow was 0% while CMCSA converted 1.81% of its revenues into cash flow. This means that, for a given level of sales, CMCSA is able to generate more free cash flow for investors.Liquidity and Financial Risk
WFC’s debt-to-equity ratio is 1.24 versus a D/E of 0.94 for CMCSA. WFC is therefore the more solvent of the two companies, and has lower financial risk.
WFC trades at a forward P/E of 9.57, a P/B of 1.37, and a P/S of 4.35, compared to a forward P/E of 12.26, a P/B of 2.28, and a P/S of 1.85 for CMCSA. 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. WFC is currently priced at a -19.56% to its one-year price target of 63.15. Comparatively, CMCSA is -28.58% relative to its price target of 46.95. This suggests that CMCSA is the better investment over the next year.
Risk and Volatility
Beta is an important measure that gives investors a sense of the market risk associated with a particular stock. A beta above 1 signals above average market risk, while a beta below 1 implies below average volatility. WFC has a beta of 1.12 and CMCSA’s beta is 1.18. WFC’s shares are therefore the less volatile of the two stocks.Insider Activity and Investor Sentiment
Short interest, or the percentage of a stock’s tradable shares currently being shorted, is another metric investors use to get a pulse on sentiment. WFC has a short ratio of 1.34 compared to a short interest of 2.13 for CMCSA. This implies that the market is currently less bearish on the outlook for WFC.Summary
Comcast Corporation (NASDAQ:CMCSA) beats Wells Fargo & Company (NYSE:WFC) on a total of 8 of the 14 factors compared between the two stocks. CMCSA is more profitable, has higher cash flow per share, has a higher cash conversion rate, higher liquidity and has lower financial risk. CMCSA is more undervalued relative to its price target. Finally, WMB has better sentiment signals based on short interest.