Citigroup Inc. (NYSE:C) shares are down more than -5.73% this year and recently decreased -0.51% or -$0.36 to settle at $70.15. HollyFrontier Corporation (NYSE:HFC), on the other hand, is up 40.63% year to date as of 09/13/2018. It currently trades at $72.03 and has returned 0.03% during the past week.
Citigroup Inc. (NYSE:C) and HollyFrontier Corporation (NYSE:HFC) are the two most active stocks in the Money Center Banks 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 C to grow earnings at a 12.80% annual rate over the next 5 years. Comparatively, HFC is expected to grow at a 47.93% annual rate. All else equal, HFC’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 13.61% for HollyFrontier Corporation (HFC). C’s ROI is 7.60% while HFC has a ROI of 8.00%. The interpretation is that HFC’s business generates a higher return on investment than C’s.Cash Flow
The amount of free cash flow available to investors is ultimately what determines the value of a stock. C’s free cash flow (“FCF”) per share for the trailing twelve months was -2.49. Comparatively, HFC’s free cash flow per share was +1.44. On a percent-of-sales basis, C’s free cash flow was -7.27% while HFC converted 1.78% of its revenues into cash flow. This means that, for a given level of sales, HFC is able to generate more free cash flow for investors.Liquidity and Financial Risk
C’s debt-to-equity ratio is 1.23 versus a D/E of 0.41 for HFC. C is therefore the more solvent of the two companies, and has lower financial risk.
C trades at a forward P/E of 9.36, a P/B of 0.98, and a P/S of 2.72, compared to a forward P/E of 10.36, a P/B of 2.17, and a P/S of 0.79 for HFC. 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. C is currently priced at a -16.01% to its one-year price target of 83.52. Comparatively, HFC is -3.74% relative to its price target of 74.83. This suggests that C is the better investment over the next year.
Risk and Volatility
To gauge the market risk of a particular stock, investors use beta. Stocks with a beta above 1 are more volatile than the market as a whole. Conversely, a beta below 1 implies below average systematic risk. C has a beta of 1.46 and HFC’s beta is 1.16. HFC’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. C has a short ratio of 1.11 compared to a short interest of 2.56 for HFC. This implies that the market is currently less bearish on the outlook for C.Summary
HollyFrontier Corporation (NYSE:HFC) beats Citigroup Inc. (NYSE:C) on a total of 8 of the 14 factors compared between the two stocks. HFC is more profitable, 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, STT has better sentiment signals based on short interest.