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A Side-by-side Analysis of State Street Corporation (STT) and CBL & Associates Properties, Inc (CBL)

State Street Corporation (NYSE:STT) shares are down more than -25.19% this year and recently increased 0.90% or $0.65 to settle at $73.02. CBL & Associates Properties, Inc (NYSE:CBL), on the other hand, is down -53.89% year to date as of 11/30/2018. It currently trades at $2.61 and has returned -2.61% during the past week.

State Street Corporation (NYSE:STT) and CBL & Associates Properties, Inc (NYSE:CBL) are the two most active stocks based on recent trading volumes. Investor interest in the two stocks is clearly very high, but which is the better investment? To answer this question, we will compare the two companies across growth, profitability, risk, and valuation metrics, and also examine their analyst ratings and insider activity trends.

Growth

Companies that can increase earnings at a high compound rate over time are attractive to investors. Analysts expect STT to grow earnings at a 9.89% annual rate over the next 5 years. Comparatively, CBL is expected to grow at a 4.90% annual rate. All else equal, STT’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 59.33% for CBL & Associates Properties, Inc (CBL). STT’s ROI is 5.20% while CBL has a ROI of 5.00%. The interpretation is that STT’s business generates a higher return on investment than CBL’s.

Cash Flow



The amount of free cash flow available to investors is ultimately what determines the value of a stock. STT’s free cash flow (“FCF”) per share for the trailing twelve months was +12.92. Comparatively, CBL’s free cash flow per share was +0.33. On a percent-of-sales basis, STT’s free cash flow was 41.65% while CBL converted 0.01% of its revenues into cash flow. This means that, for a given level of sales, STT is able to generate more free cash flow for investors.

Financial Risk

STT’s debt-to-equity ratio is 0.62 versus a D/E of 3.95 for CBL. CBL is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

STT trades at a forward P/E of 9.48, a P/B of 1.31, and a P/S of 7.88, compared to a P/B of 0.43, and a P/S of 0.51 for CBL. STT is the expensive of the two stocks on an earnings, book value and sales basis. 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. STT is currently priced at a -18.21% to its one-year price target of 89.28. Comparatively, CBL is -12.12% relative to its price target of 2.97. This suggests that STT is the better investment over the next year.

Risk and Volatility

Beta is an important measure that gives investors a sense of the market risk associated with a particular stock. A beta above 1 signals above average market risk, while a beta below 1 implies below average volatility. STT has a beta of 1.36 and CBL’s beta is 1.17. CBL’s shares are therefore the less volatile of the two stocks.

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. STT has a short ratio of 1.29 compared to a short interest of 11.57 for CBL. This implies that the market is currently less bearish on the outlook for STT.

Summary




State Street Corporation (NYSE:STT) beats CBL & Associates Properties, Inc (NYSE:CBL) on a total of 9 of the 14 factors compared between the two stocks. STT is growing fastly, 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. STT is more undervalued relative to its price target. Finally, STT has better sentiment signals based on short interest.

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