Global

Critical Comparison: Fiat Chrysler Automobiles N.V. (FCAU) vs. Invitation Homes Inc. (INVH)

Fiat Chrysler Automobiles N.V. (NYSE:FCAU) shares are up more than 9.47% this year and recently increased 0.51% or $0.1 to settle at $19.53.

Fiat Chrysler Automobiles N.V. (NYSE:FCAU) and Invitation Homes Inc. (NYSE:INVH) are the two most active stocks in the Auto Manufacturers – Major industry based on today’s trading volumes. To determine if one is a better investment than the other, we will compare the two companies’ growth, profitability, risk, return, and valuation characteristics, as well as their analyst ratings and sentiment signals.

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 FCAU to grow earnings at a 20.11% annual rate over the next 5 years. Comparatively, INVH is expected to grow at a 3.80% annual rate. All else equal, FCAU’s higher growth rate would imply a greater potential for capital appreciation.

Cash Flow

Cash is king when it comes to investing. FCAU’s free cash flow (“FCF”) per share for the trailing twelve months was +0.63. Comparatively, INVH’s free cash flow per share was +0.05. On a percent-of-sales basis, FCAU’s free cash flow was 0.98% while INVH converted 2.46% of its revenues into cash flow. This means that, for a given level of sales, INVH is able to generate more free cash flow for investors.

Valuation

FCAU trades at a forward P/E of 4.47, a P/B of 1.21, and a P/S of 0.23, compared to a forward P/E of 190.08, a P/B of 1.44, and a P/S of 9.85 for INVH. FCAU 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

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. FCAU is currently priced at a -31.9% to its one-year price target of 28.68. Comparatively, INVH is -8.43% relative to its price target of 25.74. This suggests that FCAU is the better investment over the next year.

Insider Activity and Investor Sentiment



Short interest, or the percentage of a stock’s tradable shares currently being shorted, is another metric investors use to get a pulse on sentiment. FCAU has a short ratio of 4.86 compared to a short interest of 8.07 for INVH. This implies that the market is currently less bearish on the outlook for FCAU.

Summary

Fiat Chrysler Automobiles N.V. (NYSE:FCAU) beats Invitation Homes Inc. (NYSE:INVH) on a total of 9 of the 14 factors compared between the two stocks. FCAU is growing fastly, has higher cash flow per share, higher liquidity and has lower financial risk. In terms of valuation, FCAU is the cheaper of the two stocks on an earnings, book value and sales basis, FCAU is more undervalued relative to its price target. Finally, FCAU has better sentiment signals based on short interest.

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