Earnings

Uncovering the next great stocks: Twenty-First Century Fox, Inc. (FOXA), Kohl’s Corporation (KSS)

The shares of Twenty-First Century Fox, Inc. have increased by more than 6.55% this year alone. The shares recently went up by 0.82% or $0.3 and now trades at $36.79. The shares of Kohl’s Corporation (NYSE:KSS), has jumped by 13.11% year to date as of 04/13/2018. The shares currently trade at $61.34 and have been able to report a change of -4.16% over the past one week.

The stock of Twenty-First Century Fox, Inc. and Kohl’s Corporation were two of the most active stocks on Friday. Investors seem to be very interested in what happens to the stocks of these two companies but do investors favor one over the other? We will analyze the growth, profitability, risk, valuation, and insider trends of both companies and see which one investors prefer.

Next 5Y EPS Growth: 10.60% versus 8.80%

When a company is able to grow consistently in terms of earnings at a high compound rate have the highest likelihood of creating value for its shareholders over time. Analysts have predicted that FOXA will grow it’s earning at a 10.60% annual rate in the next 5 years. This is in contrast to KSS which will have a positive growth at a 8.80% annual rate. This means that the higher growth rate of FOXA implies a greater potential for capital appreciation over the years.

Profitability and Returns

Growth alone cannot be used to see if the company will be valuable. Shareholders will be the losers if a company invest in ventures that aren’t profitable enough to support upbeat growth. In order for us to accurately measure profitability and return, we will be using the EBITDA margin and Return on Investment (ROI), which balances the difference in capital structure. FOXA has an EBITDA margin of 20.02%, this implies that the underlying business of FOXA is more profitable. The ROI of FOXA is 9.20% while that of KSS is 10.30%. These figures suggest that KSS ventures generate a higher ROI than that of FOXA.

Cash Flow



The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, FOXA’s free cash flow per share is a negative -2.99, while that of KSS is positive 3.19.

Liquidity and Financial Risk

The ability of a company to meet up with its short-term obligations and be able to clear its longer-term debts is measured using Liquidity and leverage ratios. The current ratio for FOXA is 2.20 and that of KSS is 2.00. This implies that it is easier for FOXA to cover its immediate obligations over the next 12 months than KSS. The debt ratio of FOXA is 1.08 compared to 0.83 for KSS. FOXA can be able to settle its long-term debts and thus is a lower financial risk than KSS.

Valuation

FOXA currently trades at a forward P/E of 16.16, a P/B of 3.71, and a P/S of 2.29 while KSS trades at a forward P/E of 11.12, a P/B of 1.85, and a P/S of 0.56. This means that looking at the earnings, book values and sales basis, KSS is the cheaper one. It is very obvious that earnings are the most important factors to investors, thus analysts are most likely to place their bet on the P/E.

Analyst Price Targets and Opinions




The mistake some people make is that they think a cheap stock has more value to it. In order to know the value of a stock, there is need to compare its current price to its likely trading price in the future. The price of FOXA is currently at a -9.94% to its one-year price target of 40.85. Looking at its rival pricing, KSS is at a -12.07% relative to its price target of 69.76.

When looking at the investment recommendation on say a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell), FOXA is given a 2.50 while 2.40 placed for KSS. This means that analysts are more bullish on the outlook for FOXA stocks.

Insider Activity and Investor Sentiment

Short interest or otherwise called the percentage of a stock’s tradable shares currently being shorted is another data that investors use to get a handle on sentiment. The short ratio for FOXA is 1.93 while that of KSS is just 7.14. This means that analysts are more bullish on the forecast for FOXA stock.

Conclusion

The stock of Twenty-First Century Fox, Inc. defeats that of Kohl’s Corporation when the two are compared, with FOXA taking 4 out of the total factors that were been considered. FOXA happens to be more profitable, generates a higher ROI, has higher cash flow per share, higher liquidity and has a lower financial risk. When looking at the stock valuation, FOXA is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for FOXA is better on when it is viewed on short interest.

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