Colony NorthStar, Inc. (NYSE:CLNS) shares are down more than -48.20% this year and recently decreased -1.50% or -$0.09 to settle at $5.91. Liberty Global plc (NASDAQ:LBTYK), on the other hand, is down -16.25% year to date as of 05/17/2018. It currently trades at $28.34 and has returned -5.45% during the past week.
Colony NorthStar, Inc. (NYSE:CLNS) and Liberty Global plc (NASDAQ:LBTYK) are the two most active stocks in the REIT – Diversified industry based on today’s 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.Profitability and Returns
A high growth rate isn’t necessarily valuable to investors. In fact, companies that overinvest in low return projects just to achieve a high growth rate can actually destroy shareholder value. Profitability and returns are a measure of the quality of a company’s business and its growth opportunities. We’ll use EBITDA margin and Return on Investment (ROI) to measure this. Colony NorthStar, Inc. (CLNS) has an EBITDA margin of 224.71%. This suggests that CLNS underlying business is more profitableCash Flow
The amount of free cash flow available to investors is ultimately what determines the value of a stock. CLNS’s free cash flow (“FCF”) per share for the trailing twelve months was -0.15. Comparatively, LBTYK’s free cash flow per share was +0.78. On a percent-of-sales basis, CLNS’s free cash flow was -2.9% while LBTYK converted 4.19% of its revenues into cash flow. This means that, for a given level of sales, LBTYK is able to generate more free cash flow for investors.Valuation
CLNS trades at a P/B of 0.49, and a P/S of 1.12, compared to a P/B of 3.37, and a P/S of 1.03 for LBTYK. CLNS is the cheaper of the two stocks on book value basis but is expensive in terms of P/E and P/S ratio. 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 is not necessarily a value stock. Most of the time, a stock is cheap for good reason. A stock only has value if the current price is substantially below the price at which it should trade in the future. CLNS is currently priced at a -31.28% to its one-year price target of 8.60.
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. CLNS has a short ratio of 3.49 compared to a short interest of 2.66 for LBTYK. This implies that the market is currently less bearish on the outlook for LBTYK.Summary
Liberty Global plc (NASDAQ:LBTYK) beats Colony NorthStar, Inc. (NYSE:CLNS) on a total of 8 of the 13 factors compared between the two stocks. LBTYK is more profitable, has higher cash flow per share, has a higher cash conversion rate and has lower financial risk. Finally, LBTYK has better sentiment signals based on short interest.