Fidelity National Financial, Inc. (NYSE:FNF) shares are down more than -5.50% this year and recently decreased -0.91% or -$0.34 to settle at $37.08. Agnico Eagle Mines Limited (NYSE:AEM), on the other hand, is down -1.43% year to date as of 07/13/2018. It currently trades at $45.52 and has returned -2.88% during the past week.
Fidelity National Financial, Inc. (NYSE:FNF) and Agnico Eagle Mines Limited (NYSE:AEM) are the two most active stocks in the Surety & Title Insurance industry based on today’s trading volumes. Investor interest in the two stocks is clearly very high, but which is the better investment? To answer this question, we will compare the two companies across growth, profitability, risk, and valuation metrics, and also examine their analyst ratings and insider activity trends.Growth
Companies that can increase earnings at a high compound rate over time are attractive to investors. Analysts expect FNF to grow earnings at a 1.30% annual rate over the next 5 years. Comparatively, AEM is expected to grow at a 11.15% annual rate. All else equal, AEM’s higher growth rate would imply a greater potential for capital appreciation.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. Fidelity National Financial, Inc. (FNF) has an EBITDA margin of 16.5%. This suggests that FNF underlying business is more profitable FNF’s ROI is 11.20% while AEM has a ROI of 4.90%. The interpretation is that FNF’s business generates a higher return on investment than AEM’s.Cash Flow
The amount of free cash flow available to investors is ultimately what determines the value of a stock. FNF’s free cash flow (“FCF”) per share for the trailing twelve months was -0.23. Comparatively, AEM’s free cash flow per share was -0.01. On a percent-of-sales basis, FNF’s free cash flow was -0.82% while AEM converted -0.1% of its revenues into cash flow. This means that, for a given level of sales, AEM is able to generate more free cash flow for investors.Liquidity and Financial Risk
FNF’s debt-to-equity ratio is 0.17 versus a D/E of 0.28 for AEM. AEM is therefore the more solvent of the two companies, and has lower financial risk.
FNF trades at a forward P/E of 12.16, a P/B of 2.27, and a P/S of 1.36, compared to a forward P/E of 48.89, a P/B of 2.14, and a P/S of 4.65 for AEM. 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
Investors often compare a stock’s current price to an analyst price target to get a sense of the potential upside within the next year. FNF is currently priced at a -19.74% to its one-year price target of 46.20. Comparatively, AEM is -13.69% relative to its price target of 52.74. This suggests that FNF is the better investment over the next year.
Risk and Volatility
No discussion on value is complete without taking into account risk. Analysts use a stock’s beta, which measures the volatility of a stock compared to the overall market, to measure systematic risk. A stock with a beta above 1 is more volatile than the market. Conversely, a beta below 1 implies a below average level of risk. FNF has a beta of 0.73 and AEM’s beta is -0.47. AEM’s shares are therefore the less volatile of the two stocks.Insider Activity and Investor Sentiment
The analysis of insider buying and selling trends can be extended to the aggregate level. Short interest, which represents the percentage of a stock’s tradable shares currently being shorted, captures what the market as a whole feels about a stock. FNF has a short ratio of 7.09 compared to a short interest of 2.86 for AEM. This implies that the market is currently less bearish on the outlook for AEM.Summary
Agnico Eagle Mines Limited (NYSE:AEM) beats Fidelity National Financial, Inc. (NYSE:FNF) on a total of 7 of the 14 factors compared between the two stocks. AEM is more profitable, has higher cash flow per share, has a higher cash conversion rate and higher liquidity. Finally, AEM has better sentiment signals based on short interest.