Twenty-First Century Fox, Inc. (NASDAQ:FOXA) shares are up more than 29.22% this year and recently decreased -1.93% or -$0.88 to settle at $44.62. Symantec Corporation (NASDAQ:SYMC), on the other hand, is down -29.08% year to date as of 10/10/2018. It currently trades at $19.90 and has returned -3.82% during the past week.
Twenty-First Century Fox, Inc. (NASDAQ:FOXA) and Symantec Corporation (NASDAQ:SYMC) are the two most active stocks in the Entertainment – Diversified 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 FOXA to grow earnings at a 11.60% annual rate over the next 5 years. Comparatively, SYMC is expected to grow at a 10.56% annual rate. All else equal, FOXA’s higher growth rate would imply a greater potential for capital appreciation.Profitability and Returns
Growth isn’t very attractive to investors if companies are sacrificing profitability and shareholder returns to achieve that growth. We will use EBITDA margin and Return on Investment (ROI), which control for differences in capital structure between the two companies, to measure profitability and return., compared to an EBITDA margin of 20.32% for Symantec Corporation (SYMC). FOXA’s ROI is 8.90% while SYMC has a ROI of -0.60%. The interpretation is that FOXA’s business generates a higher return on investment than SYMC’s.Cash Flow
Cash is king when it comes to investing. FOXA’s free cash flow (“FCF”) per share for the trailing twelve months was +0.75. Comparatively, SYMC’s free cash flow per share was +0.36. On a percent-of-sales basis, FOXA’s free cash flow was 4.57% while SYMC converted 4.62% of its revenues into cash flow. This means that, for a given level of sales, SYMC is able to generate more free cash flow for investors.Liquidity and Financial Risk
Liquidity and leverage ratios provide insight into the financial health of a company, and allow investors to determine the likelihood that the company will be able to continue operating as a going concern. FOXA has a current ratio of 2.30 compared to 1.10 for SYMC. This means that FOXA can more easily cover its most immediate liabilities over the next twelve months. FOXA’s debt-to-equity ratio is 1.00 versus a D/E of 0.99 for SYMC. FOXA is therefore the more solvent of the two companies, and has lower financial risk.Valuation
FOXA trades at a forward P/E of 18.61, a P/B of 4.23, and a P/S of 2.74, compared to a forward P/E of 11.44, a P/B of 2.44, and a P/S of 2.61 for SYMC. FOXA is the expensive 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 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. FOXA is currently priced at a -10.55% to its one-year price target of 49.88. Comparatively, SYMC is -10% relative to its price target of 22.11. This suggests that FOXA 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. FOXA has a beta of 1.35 and SYMC’s beta is 0.80. SYMC’s shares are therefore the less volatile of the two stocks.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. FOXA has a short ratio of 1.75 compared to a short interest of 2.12 for SYMC. This implies that the market is currently less bearish on the outlook for FOXA.Summary
Twenty-First Century Fox, Inc. (NASDAQ:FOXA) beats Symantec Corporation (NASDAQ:SYMC) on a total of 8 of the 14 factors compared between the two stocks. FOXA is growing fastly, is more profitable, generates a higher return on investment, has higher cash flow per share and higher liquidity. FOXA is more undervalued relative to its price target. Finally, FOXA has better sentiment signals based on short interest.