Fibria Celulose S.A. (NYSE:FBR) shares are up more than 27.55% this year and recently increased 0.91% or $0.17 to settle at $18.75. Colony Capital, Inc. (NYSE:CLNY), on the other hand, is down -46.01% year to date as of 11/30/2018. It currently trades at $6.16 and has returned 3.88% during the past week.
Fibria Celulose S.A. (NYSE:FBR) and Colony Capital, Inc. (NYSE:CLNY) 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
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 FBR to grow earnings at a 0.00% annual rate over the next 5 years.Profitability and Returns
Growth doesn’t mean much if it comes at the cost of weak profitability. To adjust for differences in capital structure we’ll use EBITDA margin and Return on Investment (ROI) as measures of profitability and return. EBITDA margin of 50.38% for Colony Capital, Inc. (CLNY). FBR’s ROI is 5.60% while CLNY has a ROI of -0.40%. The interpretation is that FBR’s business generates a higher return on investment than CLNY’s.Cash Flow
The value of a stock is simply the present value of its future free cash flows. FBR’s free cash flow (“FCF”) per share for the trailing twelve months was +2.71. Comparatively, CLNY’s free cash flow per share was -. On a percent-of-sales basis, FBR’s free cash flow was 40.81% while CLNY converted 0% of its revenues into cash flow. This means that, for a given level of sales, FBR is able to generate more free cash flow for investors.Liquidity and Financial Risk
FBR’s debt-to-equity ratio is 1.30 versus a D/E of 1.62 for CLNY. CLNY is therefore the more solvent of the two companies, and has lower financial risk.
FBR trades at a forward P/E of 1.90, a P/B of 2.48, and a P/S of 2.19, compared to a P/B of 0.49, and a P/S of 1.07 for CLNY. FBR 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
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. FBR is currently priced at a -9.55% to its one-year price target of 20.73. Comparatively, CLNY is -27.53% relative to its price target of 8.50. This suggests that CLNY is the better investment over the next year.
Risk and Volatility
Analyst use beta to measure a stock’s volatility relative to the overall market. Stocks with a beta above 1 tend to have bigger swings in price than the market as a whole, the opposite being the case for stocks with a beta below 1. FBR has a beta of -0.15 and CLNY’s beta is 1.17. FBR’s shares are therefore the less volatile of the two stocks.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. FBR has a short ratio of 0.89 compared to a short interest of 8.92 for CLNY. This implies that the market is currently less bearish on the outlook for FBR.Summary
Fibria Celulose S.A. (NYSE:FBR) beats Colony Capital, Inc. (NYSE:CLNY) on a total of 7 of the 14 factors compared between the two stocks. FBR 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, FBR has better sentiment signals based on short interest.