Ford Motor Company (NYSE:F) shares are down more than -24.13% this year and recently increased 0.32% or $0.03 to settle at $9.37. MetLife, Inc. (NYSE:MET), on the other hand, is down -9.97% year to date as of 09/13/2018. It currently trades at $45.52 and has returned -0.68% during the past week.
Ford Motor Company (NYSE:F) and MetLife, Inc. (NYSE:MET) are the two most active stocks in the Auto Manufacturers – Major 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
One of the key things investors look for in a company is the ability to grow earnings at a high compound rate over time. Analysts expect F to grow earnings at a 15.00% annual rate over the next 5 years. Comparatively, MET is expected to grow at a 12.55% annual rate. All else equal, F’s higher growth rate would imply a greater potential for capital appreciation.Profitability and Returns
Growth isn’t very attractive to investors if companies are sacrificing profitability and shareholder returns to achieve that growth. We will use EBITDA margin and Return on Investment (ROI), which control for differences in capital structure between the two companies, to measure profitability and return., compared to an EBITDA margin of 8.13% for MetLife, Inc. (MET). F’s ROI is 2.00% while MET has a ROI of 7.50%. The interpretation is that MET’s business generates a higher return on investment than F’s.Cash Flow
Earnings don’t always accurately reflect the amount of cash that a company brings in. F’s free cash flow (“FCF”) per share for the trailing twelve months was +0.62. Comparatively, MET’s free cash flow per share was +5.01. On a percent-of-sales basis, F’s free cash flow was 1.57% while MET converted 8% of its revenues into cash flow. This means that, for a given level of sales, MET is able to generate more free cash flow for investors.Liquidity and Financial Risk
F’s debt-to-equity ratio is 4.19 versus a D/E of 0.34 for MET. F is therefore the more solvent of the two companies, and has lower financial risk.
F trades at a forward P/E of 6.77, a P/B of 1.02, and a P/S of 0.24, compared to a forward P/E of 8.28, a P/B of 0.86, and a P/S of 0.67 for MET. 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. F is currently priced at a -14.82% to its one-year price target of 11.00. Comparatively, MET is -14.52% relative to its price target of 53.25. This suggests that F is the better investment over the next year.
Risk and Volatility
Beta is a metric that investors frequently use to analyze a stock’s systematic risk. A beta above 1 implies above average market volatility. Conversely, a stock with a beta below 1 is seen as less risky than the overall market. F has a beta of 0.86 and MET’s beta is 1.21. F’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. F has a short ratio of 2.86 compared to a short interest of 2.55 for MET. This implies that the market is currently less bearish on the outlook for MET.Summary
MetLife, Inc. (NYSE:MET) beats Ford Motor Company (NYSE:F) on a total of 8 of the 14 factors compared between the two stocks. MET is growing fastly, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate and has lower financial risk. Finally, MET has better sentiment signals based on short interest.