Global

Should You Buy Tailored Brands, Inc. (TLRD) or Blackstone Mortgage Trust, Inc. (BXMT)?

Tailored Brands, Inc. (NYSE:TLRD) shares are up more than 5.59% this year and recently increased 0.13% or $0.03 to settle at $23.05. Blackstone Mortgage Trust, Inc. (NYSE:BXMT), on the other hand, is up 9.60% year to date as of 12/06/2018. It currently trades at $35.27 and has returned -0.48% during the past week.

Tailored Brands, Inc. (NYSE:TLRD) and Blackstone Mortgage Trust, Inc. (NYSE:BXMT) are the two most active stocks based on recent trading volumes. We will compare the two companies based on the strength of various metrics, including growth, profitability, risk, return, and valuation to determine if one is a better investment than the other.

Growth

The ability to consistently grow earnings at a high compound rate is a defining characteristic of the best companies for long-term investment. Analysts expect TLRD to grow earnings at a 8.30% annual rate over the next 5 years. Comparatively, BXMT is expected to grow at a 3.45% annual rate. All else equal, TLRD’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 132.41% for Blackstone Mortgage Trust, Inc. (BXMT). TLRD’s ROI is 14.00% while BXMT has a ROI of 2.20%. The interpretation is that TLRD’s business generates a higher return on investment than BXMT’s.

Cash Flow



The amount of free cash flow available to investors is ultimately what determines the value of a stock. TLRD’s free cash flow (“FCF”) per share for the trailing twelve months was +1.08. Comparatively, BXMT’s free cash flow per share was +0.16. On a percent-of-sales basis, TLRD’s free cash flow was 1.63% while BXMT converted 0% of its revenues into cash flow. This means that, for a given level of sales, TLRD is able to generate more free cash flow for investors.

Valuation

TLRD trades at a forward P/E of 7.93, and a P/S of 0.35, compared to a forward P/E of 12.94, a P/B of 1.24, and a P/S of 6.07 for BXMT. TLRD 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. TLRD is currently priced at a -33.19% to its one-year price target of 34.50. Comparatively, BXMT is 0.23% relative to its price target of 35.19. This suggests that TLRD 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. TLRD has a beta of 1.64 and BXMT’s beta is 0.48. BXMT’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. TLRD has a short ratio of 9.70 compared to a short interest of 8.99 for BXMT. This implies that the market is currently less bearish on the outlook for BXMT.

Summary




Tailored Brands, Inc. (NYSE:TLRD) beats Blackstone Mortgage Trust, Inc. (NYSE:BXMT) on a total of 11 of the 14 factors compared between the two stocks. TLRD 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. In terms of valuation, TLRD is the cheaper of the two stocks on an earnings, book value and sales basis, TLRD is more undervalued relative to its price target. Finally, ATHN has better sentiment signals based on short interest.

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