Global

Dissecting the Numbers for Camping World Holdings, Inc. (CWH) and Herbalife Nutrition Ltd. (HLF)

Camping World Holdings, Inc. (NYSE:CWH) shares are down more than -43.72% this year and recently increased 3.77% or $0.91 to settle at $25.05. Herbalife Nutrition Ltd. (NYSE:HLF), on the other hand, is up 57.47% year to date as of 07/05/2018. It currently trades at $53.32 and has returned -0.86% during the past week.

Camping World Holdings, Inc. (NYSE:CWH) and Herbalife Nutrition Ltd. (NYSE:HLF) are the two most active stocks in the REIT – Office industry based on today’s trading volumes. The market is clearly enthusiastic about both these stocks, but which is the better investment? To answer this, we will compare the two companies based on the strength of their growth, profitability, risk, returns, valuation, analyst recommendations, and insider trends.

Growth

Companies that can increase earnings at a high compound rate over time are attractive to investors. Analysts expect CWH to grow earnings at a 10.70% annual rate over the next 5 years. Comparatively, HLF is expected to grow at a -0.50% annual rate. All else equal, CWH’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 17.37% for Herbalife Nutrition Ltd. (HLF). CWH’s ROI is 16.50% while HLF has a ROI of 26.50%. The interpretation is that HLF’s business generates a higher return on investment than CWH’s.

Cash Flow



The amount of free cash flow available to investors is ultimately what determines the value of a stock. CWH’s free cash flow (“FCF”) per share for the trailing twelve months was -1.70. Comparatively, HLF’s free cash flow per share was +0.92. On a percent-of-sales basis, CWH’s free cash flow was -3.48% while HLF converted 3.67% of its revenues into cash flow. This means that, for a given level of sales, HLF is able to generate more free cash flow for investors.

Liquidity and Financial Risk

Analysts look at liquidity and leverage ratios to assess how easily a company can cover its liabilities. CWH has a current ratio of 1.50 compared to 2.10 for HLF. This means that HLF can more easily cover its most immediate liabilities over the next twelve months.

Valuation

CWH trades at a forward P/E of 7.78, a P/B of 16.06, and a P/S of 0.47, compared to a forward P/E of 16.74, and a P/S of 1.96 for HLF. 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. CWH is currently priced at a -35.92% to its one-year price target of 39.09. Comparatively, HLF is -12.59% relative to its price target of 61.00. This suggests that CWH is the better investment over the next year.

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. CWH has a short ratio of 5.36 compared to a short interest of 6.28 for HLF. This implies that the market is currently less bearish on the outlook for CWH.

Summary




Herbalife Nutrition Ltd. (NYSE:HLF) beats Camping World Holdings, Inc. (NYSE:CWH) on a total of 7 of the 14 factors compared between the two stocks. HLF is growing fastly, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate, higher liquidity and has lower financial risk. Finally, UNM has better sentiment signals based on short interest.

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