Post Holdings, Inc. (NYSE:POST) shares are up more than 18.11% this year and recently increased 7.96% or $6.9 to settle at $93.58. Athene Holding Ltd. (NYSE:ATH), on the other hand, is down -4.80% year to date as of 08/03/2018. It currently trades at $49.23 and has returned 9.23% during the past week.
Post Holdings, Inc. (NYSE:POST) and Athene Holding Ltd. (NYSE:ATH) are the two most active stocks in the Food – Major Diversified 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 POST to grow earnings at a 29.20% annual rate over the next 5 years. Comparatively, ATH is expected to grow at a 15.00% annual rate. All else equal, POST’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 18.85% for Athene Holding Ltd. (ATH). POST’s ROI is 2.70% while ATH has a ROI of 14.10%. The interpretation is that ATH’s business generates a higher return on investment than POST’s.Cash Flow
The value of a stock is simply the present value of its future free cash flows. POST’s free cash flow (“FCF”) per share for the trailing twelve months was +3.59. Comparatively, ATH’s free cash flow per share was -. On a percent-of-sales basis, POST’s free cash flow was 4.62% while ATH converted 0% of its revenues into cash flow. This means that, for a given level of sales, POST is able to generate more free cash flow for investors.Liquidity and Financial Risk
POST’s debt-to-equity ratio is 2.38 versus a D/E of 0.11 for ATH. POST is therefore the more solvent of the two companies, and has lower financial risk.
POST trades at a forward P/E of 17.08, a P/B of 2.00, and a P/S of 1.09, compared to a forward P/E of 7.58, a P/B of 1.12, and a P/S of 1.10 for ATH. POST is the cheaper of the two stocks on sales basis but is expensive in terms of P/E and P/B 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
A cheap stock is not necessarily a value stock. Most of the time, a stock is cheap for good reason. A stock only has value if the current price is substantially below the price at which it should trade in the future. POST is currently priced at a -3.53% to its one-year price target of 97.00. Comparatively, ATH is -17.16% relative to its price target of 59.43. This suggests that ATH 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. POST has a short ratio of 12.61 compared to a short interest of 2.38 for ATH. This implies that the market is currently less bearish on the outlook for ATH.Summary
Athene Holding Ltd. (NYSE:ATH) beats Post Holdings, Inc. (NYSE:POST) on a total of 7 of the 14 factors compared between the two stocks. ATH is growing fastly, generates a higher return on investment and has lower financial risk. In terms of valuation, ATH is the cheaper of the two stocks on an earnings and book value, ATH is more undervalued relative to its price target. Finally, ATH has better sentiment signals based on short interest.