Albemarle Corporation (NYSE:ALB) shares are down more than -12.57% this year and recently decreased -4.09% or -$2.87 to settle at $67.38. News Corporation (NASDAQ:NWS), on the other hand, is up 24.68% year to date as of 08/12/2019. It currently trades at $14.40 and has returned 10.01% during the past week.
Albemarle Corporation (NYSE:ALB) and News Corporation (NASDAQ:NWS) are the two most active stocks in the Specialty Chemicals 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.
Companies that can consistently grow earnings at a high compound rate usually have the greatest potential to create value for shareholders in the long-run. Analysts expect ALB to grow earnings at a 14.35% annual rate over the next 5 years.
Growth in and of itself is not necessarily valuable, and it can even be harmful to shareholders if companies overinvest in unprofitable projects in pursuit of that growth. We will use EBITDA margin and Return on Investment (ROI), which adjust for differences in capital structure, as measure of profitability and return. , compared to an EBITDA margin of 6.8% for News Corporation (NWS).Cash Flow
Cash is king when it comes to investing. ALB’s free cash flow (“FCF”) per share for the trailing twelve months was -0.88. Comparatively, NWS’s free cash flow per share was +0.09. On a percent-of-sales basis, ALB’s free cash flow was -2.76% while NWS converted 0.58% of its revenues into cash flow. This means that, for a given level of sales, NWS is able to generate more free cash flow for investors.
ALB trades at a forward P/E of 10.18, a P/B of 1.88, and a P/S of 2.21, compared to a P/B of 0.92, for NWS. ALB 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. ALB is currently priced at a -28.24% to its one-year price target of 93.90.
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. ALB has a short ratio of 11.02 compared to a short interest of 2.30 for NWS. This implies that the market is currently less bearish on the outlook for NWS.
News Corporation (NASDAQ:NWS) beats Albemarle Corporation (NYSE:ALB) on a total of 9 of the 13 factors compared between the two stocks. NWS is growing fastly, has a higher cash conversion rate and has lower financial risk. In terms of valuation, NWS is the cheaper of the two stocks on an earnings, book value and sales basis, Finally, NWS has better sentiment signals based on short interest.