Global

Choosing Between Landcadia Holdings, Inc. (LCA) and SunTrust Banks, Inc. (STI)

Landcadia Holdings, Inc. (NASDAQ:LCA) shares are up more than 2.31% this year and recently increased 0.69% or $0.07 to settle at $10.17. SunTrust Banks, Inc. (NYSE:STI), on the other hand, is up 7.42% year to date as of 05/17/2018. It currently trades at $69.38 and has returned 0.06% during the past week.

Landcadia Holdings, Inc. (NASDAQ:LCA) and SunTrust Banks, Inc. (NYSE:STI) are the two most active stocks in the Conglomerates industry 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.

Growth

The ability to consistently grow earnings at a high compound rate is a defining characteristic of the best companies for long-term investment. Comparatively, STI is expected to grow at a 14.47% annual rate. All else equal, STI’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. EBITDA margin of 51.98% for SunTrust Banks, Inc. (STI).

Cash Flow



The amount of free cash flow available to investors is ultimately what determines the value of a stock. LCA’s free cash flow (“FCF”) per share for the trailing twelve months was -0.02. Comparatively, STI’s free cash flow per share was -0.22.

Valuation

LCA trades at a P/B of 15.46, compared to a forward P/E of 12.35, a P/B of 1.46, and a P/S of 4.89 for STI. 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.

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. LCA has a short ratio of 0.01 compared to a short interest of 3.39 for STI. This implies that the market is currently less bearish on the outlook for LCA.

Summary

Landcadia Holdings, Inc. (NASDAQ:LCA) beats SunTrust Banks, Inc. (NYSE:STI) on a total of 8 of the 12 factors compared between the two stocks. LCA has higher cash flow per share, higher liquidity and has lower financial risk. In terms of valuation, LCA is the cheaper of the two stocks on an earnings and sales basis, Finally, LCA has better sentiment signals based on short interest.

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