Global

Dissecting the Numbers for Fang Holdings Limited (SFUN) and Crocs, Inc. (CROX)

Fang Holdings Limited (NYSE:SFUN) shares are down more than -60.57% this year and recently decreased -1.79% or -$0.04 to settle at $2.20. Crocs, Inc. (NASDAQ:CROX), on the other hand, is up 53.01% year to date as of 10/11/2018. It currently trades at $19.34 and has returned 0.31% during the past week.

Fang Holdings Limited (NYSE:SFUN) and Crocs, Inc. (NASDAQ:CROX) are the two most active stocks in the Internet Information Providers 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

The ability to grow earnings at a compound rate over time is a crucial determinant of investment value. Comparatively, CROX is expected to grow at a 10.00% annual rate. All else equal, CROX’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. EBITDA margin of 6.57% for Crocs, Inc. (CROX). SFUN’s ROI is 1.30% while CROX has a ROI of 5.40%. The interpretation is that CROX’s business generates a higher return on investment than SFUN’s.

Cash Flow



The amount of free cash flow available to investors is ultimately what determines the value of a stock. On a percent-of-sales basis, SFUN’s free cash flow was 0% while CROX converted 7.71% of its revenues into cash flow. This means that, for a given level of sales, CROX 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. SFUN has a current ratio of 1.20 compared to 2.40 for CROX. This means that CROX can more easily cover its most immediate liabilities over the next twelve months. SFUN’s debt-to-equity ratio is 0.96 versus a D/E of 0.00 for CROX. SFUN is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

SFUN trades at a forward P/E of 8.76, a P/B of 1.46, and a P/S of 2.83, compared to a forward P/E of 25.51, a P/B of 6.65, and a P/S of 1.26 for CROX. 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

Just because a stock is cheaper doesn’t mean there’s more value to be had. In order to assess value we need to compare the current price to where it’s likely to trade in the future. SFUN is currently priced at a -46.86% to its one-year price target of 4.14. Comparatively, CROX is 5.11% relative to its price target of 18.40. This suggests that SFUN 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. SFUN has a beta of 0.92 and CROX’s beta is 0.63. CROX’s shares are therefore the less volatile of the two stocks.

Insider Activity and Investor Sentiment




Analysts often look at short interest, or the percentage of a company’s float currently being shorted by investors, to aid in their outlook for a particular stock. SFUN has a short ratio of 11.63 compared to a short interest of 9.24 for CROX. This implies that the market is currently less bearish on the outlook for CROX.

Summary

Crocs, Inc. (NASDAQ:CROX) beats Fang Holdings Limited (NYSE:SFUN) on a total of 10 of the 14 factors compared between the two stocks. CROX , 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, CROX has better sentiment signals based on short interest.

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