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A Side-by-side Analysis of Camping World Holdings, Inc. (CWH) and Altra Industrial Motion Corp. (AIMC)

Camping World Holdings, Inc. (NYSE:CWH) shares are down more than -55.56% this year and recently decreased -2.56% or -$0.52 to settle at $19.78. Altra Industrial Motion Corp. (NASDAQ:AIMC), on the other hand, is down -22.92% year to date as of 09/11/2018. It currently trades at $38.85 and has returned 0.52% during the past week.

Camping World Holdings, Inc. (NYSE:CWH) and Altra Industrial Motion Corp. (NASDAQ:AIMC) are the two most active stocks in the REIT – Office 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

Companies that can consistently grow earnings at a high compound rate usually have the greatest potential to create value for shareholders in the long-run. Analysts expect CWH to grow earnings at a 8.40% annual rate over the next 5 years. Comparatively, AIMC is expected to grow at a 15.10% annual rate. All else equal, AIMC’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 12.24% for Altra Industrial Motion Corp. (AIMC). CWH’s ROI is 16.50% while AIMC has a ROI of 7.70%. The interpretation is that CWH’s business generates a higher return on investment than AIMC’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 +0.24. Comparatively, AIMC’s free cash flow per share was +0.43. On a percent-of-sales basis, CWH’s free cash flow was 0.49% while AIMC converted 0% of its revenues into cash flow. This means that, for a given level of sales, CWH 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. CWH has a current ratio of 1.40 compared to 2.60 for AIMC. This means that AIMC can more easily cover its most immediate liabilities over the next twelve months. CWH’s debt-to-equity ratio is 28.77 versus a D/E of 0.63 for AIMC. CWH is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

CWH trades at a forward P/E of 6.69, a P/B of 10.30, and a P/S of 0.36, compared to a forward P/E of 12.37, a P/B of 2.73, and a P/S of 1.24 for AIMC. 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. CWH is currently priced at a -43.49% to its one-year price target of 35.00. Comparatively, AIMC is -25.29% relative to its price target of 52.00. This suggests that CWH is the better investment over the next year.

Insider Activity and Investor Sentiment

Comparing the number of shares sold short to the float is a method analysts often use to get a reading on investor sentiment. CWH has a short ratio of 6.61 compared to a short interest of 1.53 for AIMC. This implies that the market is currently less bearish on the outlook for AIMC.

Summary




Altra Industrial Motion Corp. (NASDAQ:AIMC) beats Camping World Holdings, Inc. (NYSE:CWH) on a total of 7 of the 14 factors compared between the two stocks. AIMC generates a higher return on investment, is more profitable, has higher cash flow per share, higher liquidity and has lower financial risk. Finally, AIMC has better sentiment signals based on short interest.

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