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Critical Comparison: Investment Technology Group, Inc. (ITG) vs. Americold Realty Trust (COLD)

Investment Technology Group, Inc. (NYSE:ITG) shares are up more than 56.47% this year and recently decreased -0.03% or -$0.01 to settle at $30.12. Americold Realty Trust (NYSE:COLD), on the other hand, is up 55.88% year to date as of 12/06/2018. It currently trades at $27.70 and has returned 3.59% during the past week.

Investment Technology Group, Inc. (NYSE:ITG) and Americold Realty Trust (NYSE:COLD) are the two most active stocks based on recent 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 consistently grow earnings at a high compound rate is a defining characteristic of the best companies for long-term investment. Comparatively, COLD is expected to grow at a 3.00% annual rate. All else equal, COLD’s higher growth rate would imply a greater potential for capital appreciation.

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. Investment Technology Group, Inc. (ITG) has an EBITDA margin of 12.99%. This suggests that ITG underlying business is more profitable ITG’s ROI is -7.80% while COLD has a ROI of 7.00%. The interpretation is that COLD’s business generates a higher return on investment than ITG’s.

Cash Flow



The amount of free cash flow available to investors is ultimately what determines the value of a stock. ITG’s free cash flow (“FCF”) per share for the trailing twelve months was +0.83. Comparatively, COLD’s free cash flow per share was -0.51. On a percent-of-sales basis, ITG’s free cash flow was 0.01% while COLD converted -4.89% of its revenues into cash flow. This means that, for a given level of sales, ITG is able to generate more free cash flow for investors.

Financial Risk

ITG’s debt-to-equity ratio is 0.15 versus a D/E of 2.10 for COLD. COLD is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

ITG trades at a forward P/E of 18.04, a P/B of 2.78, and a P/S of 1.96, compared to a forward P/E of 47.35, a P/B of 5.50, and a P/S of 2.59 for COLD. ITG is the cheaper 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 isn’t a good investment if the stock is priced accurately. To get a sense of “value” we must compare the current price to some measure of intrinsic value such as a price target. ITG is currently priced at a -0.59% to its one-year price target of 30.30. Comparatively, COLD is -0.43% relative to its price target of 27.82. This suggests that ITG is the better investment over the next year.

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. ITG has a short ratio of 0.83 compared to a short interest of 6.47 for COLD. This implies that the market is currently less bearish on the outlook for ITG.

Summary

Investment Technology Group, Inc. (NYSE:ITG) beats Americold Realty Trust (NYSE:COLD) on a total of 10 of the 14 factors compared between the two stocks. ITG is more profitable, has higher cash flow per share, has a higher cash conversion rate, higher liquidity and has lower financial risk. In terms of valuation, ITG is the cheaper of the two stocks on an earnings, book value and sales basis, ITG is more undervalued relative to its price target. Finally, ITG has better sentiment signals based on short interest.

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