Pfizer Inc. (NYSE:PFE) shares are up more than 24.63% this year and recently decreased -1.85% or -$0.85 to settle at $45.14. Twenty-First Century Fox, Inc. (NASDAQ:FOXA), on the other hand, is up 42.25% year to date as of 12/04/2018. It currently trades at $49.12 and has returned 0.04% during the past week.
Pfizer Inc. (NYSE:PFE) and Twenty-First Century Fox, Inc. (NASDAQ:FOXA) are the two most active stocks based on recent 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 PFE to grow earnings at a 7.42% annual rate over the next 5 years. Comparatively, FOXA is expected to grow at a 7.56% annual rate. All else equal, FOXA’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 21.04% for Twenty-First Century Fox, Inc. (FOXA). PFE’s ROI is 11.00% while FOXA has a ROI of 8.90%. The interpretation is that PFE’s business generates a higher return on investment than FOXA’s.Cash Flow
The amount of free cash flow available to investors is ultimately what determines the value of a stock. PFE’s free cash flow (“FCF”) per share for the trailing twelve months was +0.45. Comparatively, FOXA’s free cash flow per share was +0.21. On a percent-of-sales basis, PFE’s free cash flow was 5.1% while FOXA converted 1.28% of its revenues into cash flow. This means that, for a given level of sales, PFE is able to generate more free cash flow for investors.Liquidity and Financial Risk
Balance sheet risk is one of the biggest factors to consider before investing. PFE has a current ratio of 1.40 compared to 2.50 for FOXA. This means that FOXA can more easily cover its most immediate liabilities over the next twelve months. PFE’s debt-to-equity ratio is 0.58 versus a D/E of 0.93 for FOXA. FOXA is therefore the more solvent of the two companies, and has lower financial risk.Valuation
PFE trades at a forward P/E of 14.71, a P/B of 3.72, and a P/S of 4.97, compared to a forward P/E of 22.03, a P/B of 4.40, and a P/S of 2.98 for FOXA. 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
When investing it’s crucial to distinguish between price and value. As Warren Buffet said, “price is what you pay, value is what you get”. PFE is currently priced at a 2.24% to its one-year price target of 44.15. Comparatively, FOXA is -2.37% relative to its price target of 50.31. This suggests that FOXA 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. PFE has a beta of 0.86 and FOXA’s beta is 1.25. PFE’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. PFE has a short ratio of 2.12 compared to a short interest of 2.11 for FOXA. This implies that the market is currently less bearish on the outlook for FOXA.Summary
Pfizer Inc. (NYSE:PFE) beats Twenty-First Century Fox, Inc. (NASDAQ:FOXA) on a total of 8 of the 14 factors compared between the two stocks. PFE is more profitable, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate and has lower financial risk. In terms of valuation, PFE is the cheaper of the two stocks on an earnings and book value, Finally, C has better sentiment signals based on short interest.