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Choosing Between Mondelez International, Inc. (MDLZ) and Nielsen Holdings plc (NLSN)

Nielsen Holdings plc (NYSE:NLSN), on the other hand, is down -14.15% year to date as of 05/17/2018. It currently trades at $31.25 and has returned 3.14% during the past week.

Mondelez International, Inc. (NASDAQ:MDLZ) and Nielsen Holdings plc (NYSE:NLSN) are the two most active stocks in the Confectioners 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 MDLZ to grow earnings at a 10.68% annual rate over the next 5 years. Comparatively, NLSN is expected to grow at a 25.30% annual rate. All else equal, NLSN’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 19.52% for Nielsen Holdings plc (NLSN). MDLZ’s ROI is 6.30% while NLSN has a ROI of 7.40%. The interpretation is that NLSN’s business generates a higher return on investment than MDLZ’s.

Cash Flow



The value of a stock is simply the present value of its future free cash flows. MDLZ’s free cash flow (“FCF”) per share for the trailing twelve months was -0.14. Comparatively, NLSN’s free cash flow per share was -0.74. On a percent-of-sales basis, MDLZ’s free cash flow was -0.8% while NLSN converted -4.01% of its revenues into cash flow. This means that, for a given level of sales, MDLZ is able to generate more free cash flow for investors.

Liquidity and Financial Risk

Balance sheet risk is one of the biggest factors to consider before investing. MDLZ has a current ratio of 0.50 compared to 1.20 for NLSN. This means that NLSN can more easily cover its most immediate liabilities over the next twelve months. MDLZ’s debt-to-equity ratio is 0.71 versus a D/E of 2.03 for NLSN. NLSN is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

MDLZ trades at a forward P/E of 14.81, a P/B of 2.23, and a P/S of 2.24, compared to a forward P/E of 16.97, a P/B of 2.62, and a P/S of 1.67 for NLSN. 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 isn’t a good investment if the stock is priced accurately. To get a sense of “value” we must compare the current price to some measure of intrinsic value such as a price target. MDLZ is currently priced at a -19.45% to its one-year price target of 49.06. Comparatively, NLSN is -22.01% relative to its price target of 40.07. This suggests that NLSN is the better investment over the next year.

Risk and Volatility

Analyst use beta to measure a stock’s volatility relative to the overall market. Stocks with a beta above 1 tend to have bigger swings in price than the market as a whole, the opposite being the case for stocks with a beta below 1. MDLZ has a beta of 0.90 and NLSN’s beta is 0.96. MDLZ’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. MDLZ has a short ratio of 1.36 compared to a short interest of 6.73 for NLSN. This implies that the market is currently less bearish on the outlook for MDLZ.

Summary

Mondelez International, Inc. (NASDAQ:MDLZ) beats Nielsen Holdings plc (NYSE:NLSN) on a total of 8 of the 14 factors compared between the two stocks. MDLZ has higher cash flow per share, has a higher cash conversion rate and has lower financial risk. In terms of valuation, MDLZ is the cheaper of the two stocks on an earnings and book value, Finally, MDLZ has better sentiment signals based on short interest.

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