Earnings

Uncovering the next great stocks: CSX Corporation (CSX), Skechers U.S.A., Inc. (SKX)

The shares of CSX Corporation have increased by more than 14.34% this year alone. The shares recently went down by -0.30% or -$0.19 and now trades at $62.90. The shares of Skechers U.S.A., Inc. (NYSE:SKX), has slumped by -23.55% year to date as of 05/14/2018. The shares currently trade at $28.93 and have been able to report a change of -0.41% over the past one week.

The stock of CSX Corporation and Skechers U.S.A., Inc. were two of the most active stocks on Monday. Investors seem to be very interested in what happens to the stocks of these two companies but do investors favor one over the other? We will analyze the growth, profitability, risk, valuation, and insider trends of both companies and see which one investors prefer.

Next 5Y EPS Growth: 18.74% versus 15.00%

When a company is able to grow consistently in terms of earnings at a high compound rate have the highest likelihood of creating value for its shareholders over time. Analysts have predicted that CSX will grow it’s earning at a 18.74% annual rate in the next 5 years. This is in contrast to SKX which will have a positive growth at a 15.00% annual rate. This means that the higher growth rate of CSX implies a greater potential for capital appreciation over the years.

Profitability and Returns

Growth alone cannot be used to see if the company will be valuable. Shareholders will be the losers if a company invest in ventures that aren’t profitable enough to support upbeat growth. In order for us to accurately measure profitability and return, we will be using the EBITDA margin and Return on Investment (ROI), which balances the difference in capital structure. CSX has an EBITDA margin of 46.85%, this implies that the underlying business of CSX is more profitable. The ROI of CSX is 9.40% while that of SKX is 17.50%. These figures suggest that SKX ventures generate a higher ROI than that of CSX.

Cash Flow



The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, CSX’s free cash flow per share is a positive 3.45, while that of SKX is negative -0.77.

Liquidity and Financial Risk

The ability of a company to meet up with its short-term obligations and be able to clear its longer-term debts is measured using Liquidity and leverage ratios. The current ratio for CSX is 1.90 and that of SKX is 3.40. This implies that it is easier for CSX to cover its immediate obligations over the next 12 months than SKX. The debt ratio of CSX is 0.96 compared to 0.04 for SKX. CSX can be able to settle its long-term debts and thus is a lower financial risk than SKX.

Valuation

CSX currently trades at a forward P/E of 16.77, a P/B of 3.87, and a P/S of 4.87 while SKX trades at a forward P/E of 11.56, a P/B of 2.33, and a P/S of 1.07. This means that looking at the earnings, book values and sales basis, SKX is the cheaper one. It is very obvious that earnings are the most important factors to investors, thus analysts are most likely to place their bet on the P/E.

Analyst Price Targets and Opinions




The mistake some people make is that they think a cheap stock has more value to it. In order to know the value of a stock, there is need to compare its current price to its likely trading price in the future. The price of CSX is currently at a -0.77% to its one-year price target of 63.39. Looking at its rival pricing, SKX is at a -40.35% relative to its price target of 48.50.

When looking at the investment recommendation on say a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell), CSX is given a 2.20 while 1.50 placed for SKX. This means that analysts are more bullish on the outlook for CSX stocks.

Insider Activity and Investor Sentiment

Short interest or otherwise called the percentage of a stock’s tradable shares currently being shorted is another data that investors use to get a handle on sentiment. The short ratio for CSX is 2.34 while that of SKX is just 2.75. This means that analysts are more bullish on the forecast for CSX stock.

Conclusion

The stock of CSX Corporation defeats that of Skechers U.S.A., Inc. when the two are compared, with CSX taking 5 out of the total factors that were been considered. CSX happens to be more profitable, generates a higher ROI, has higher cash flow per share, higher liquidity and has a lower financial risk. When looking at the stock valuation, CSX is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for CSX is better on when it is viewed on short interest.

Previous ArticleNext Article

Related Post

Critical Comparison: CBRE Group, Inc. (CBG) vs. Pa... CBRE Group, Inc. (NYSE:CBG) shares are up more than 29.41% this year and recently increased 2.13% or $0.85 to settle at $40.75. Paramount Group, Inc. ...
A Comparison of Top Movers: PayPal Holdings, Inc. ...   The shares of PayPal Holdings, Inc. have increased by more than 7.62% this year alone. The shares recently went up by 0.20% or $0.16 and now...
Should You Buy General Electric Company (GE) or Fl... General Electric Company (NYSE:GE) shares are up more than 6.19% this year and recently increased 2.09% or $0.38 to settle at $18.53. Flowserve Corpor...
Should You Buy Apache Corporation (APA) or Sanchez... Apache Corporation (NYSE:APA) shares are down more than -32.63% this year and recently increased 0.07% or $0.03 to settle at $42.76. Sanchez Energy Co...
Is Halcon Resources Corporation (HK) Worth Signifi... Halcon Resources Corporation (NYSE:HK) fell by -7.74% in Wednesday’s trading session from $6.59 to $6.08. The price has been moving in both directions...