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Critical Comparison: Brixmor Property Group Inc. (BRX) vs. American Express Company (AXP)

Brixmor Property Group Inc. (NYSE:BRX) shares are down more than -23.58% this year and recently increased 0.64% or $0.09 to settle at $14.26. American Express Company (NYSE:AXP), on the other hand, is up 1.92% year to date as of 05/17/2018. It currently trades at $101.22 and has returned -0.16% during the past week.

Brixmor Property Group Inc. (NYSE:BRX) and American Express Company (NYSE:AXP) are the two most active stocks in the REIT – Retail 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 BRX to grow earnings at a -5.09% annual rate over the next 5 years. Comparatively, AXP is expected to grow at a 11.63% annual rate. All else equal, AXP’s higher growth rate would imply a greater potential for capital appreciation.

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 37.55% for American Express Company (AXP). BRX’s ROI is 5.30% while AXP has a ROI of 3.70%. The interpretation is that BRX’s business generates a higher return on investment than AXP’s.

Cash Flow



Earnings don’t always accurately reflect the amount of cash that a company brings in. BRX’s free cash flow (“FCF”) per share for the trailing twelve months was -0.12. Comparatively, AXP’s free cash flow per share was +1.74. On a percent-of-sales basis, BRX’s free cash flow was -2.83% while AXP converted 4.21% of its revenues into cash flow. This means that, for a given level of sales, AXP is able to generate more free cash flow for investors.

Financial Risk

BRX’s debt-to-equity ratio is 1.96 versus a D/E of 6.17 for AXP. AXP is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

BRX trades at a forward P/E of 16.68, a P/B of 1.52, and a P/S of 3.42, compared to a forward P/E of 12.59, a P/B of 4.43, and a P/S of 2.35 for AXP. BRX is the cheaper of the two stocks on book value basis but is expensive in terms of P/E and P/S ratio. 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. BRX is currently priced at a -21.65% to its one-year price target of 18.20. Comparatively, AXP is -7.23% relative to its price target of 109.11. This suggests that BRX 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. BRX has a beta of 0.38 and AXP’s beta is 1.10. BRX’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. BRX has a short ratio of 2.47 compared to a short interest of 2.23 for AXP. This implies that the market is currently less bearish on the outlook for AXP.

Summary




Brixmor Property Group Inc. (NYSE:BRX) beats American Express Company (NYSE:AXP) on a total of 8 of the 14 factors compared between the two stocks. BRX is more profitable, generates a higher return on investment, higher liquidity and has lower financial risk. BRX is more undervalued relative to its price target. Finally, LCA has better sentiment signals based on short interest.

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