The shares of The TJX Companies, Inc. have increased by more than 26.73% this year alone. The shares recently went down by -0.39% or -$0.22 and now trades at $56.70. The shares of Nielsen Holdings plc (NYSE:NLSN), has slumped by -2.10% year to date as of 09/11/2019. The shares currently trade at $22.84 and have been able to report a change of 10.98% over the past one week.
The stock of The TJX Companies, Inc. and Nielsen Holdings plc were two of the most active stocks on Wednesday. Investors seem to be very interested in what happens to the stocks of these two companies but do investors favor one over the other? We will analyze the growth, profitability, risk, valuation, and insider trends of both companies and see which one investors prefer.
When a company is able to grow consistently in terms of earnings at a high compound rate have the highest likelihood of creating value for its shareholders over time. Analysts have predicted that TJX will grow it’s earning at a 8.51% annual rate in the next 5 years. This is in contrast to NLSN which will have a positive growth at a -2.00% annual rate. This means that the higher growth rate of TJX implies a greater potential for capital appreciation over the years.
Growth alone cannot be used to see if the company will be valuable. Shareholders will be the losers if a company invest in ventures that aren’t profitable enough to support upbeat growth. In order for us to accurately measure profitability and return, we will be using the EBITDA margin and Return on Investment (ROI), which balances the difference in capital structure. TJX has an EBITDA margin of 12.58%, this implies that the underlying business of NLSN is more profitable. The ROI of TJX is 41.80% while that of NLSN is -4.60%. These figures suggest that TJX ventures generate a higher ROI than that of NLSN.Cash Flow
The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, TJX’s free cash flow per share is a positive 0.53, while that of NLSN is positive 1.31.
The ability of a company to meet up with its short-term obligations and be able to clear its longer-term debts is measured using Liquidity and leverage ratios. The current ratio for TJX is 1.30 and that of NLSN is 1.10. This implies that it is easier for TJX to cover its immediate obligations over the next 12 months than NLSN. The debt ratio of TJX is 0.42 compared to 3.10 for NLSN. NLSN can be able to settle its long-term debts and thus is a lower financial risk than TJX.Valuation
TJX currently trades at a forward P/E of 19.96, a P/B of 12.95, and a P/S of 1.72 while NLSN trades at a forward P/E of 12.42, a P/B of 2.91, and a P/S of 1.26. This means that looking at the earnings, book values and sales basis, NLSN is the cheaper one. It is very obvious that earnings are the most important factors to investors, thus analysts are most likely to place their bet on the P/E.Analyst Price Targets and Opinions
The mistake some people make is that they think a cheap stock has more value to it. In order to know the value of a stock, there is need to compare its current price to its likely trading price in the future. The price of TJX is currently at a -4.04% to its one-year price target of 59.09. Looking at its rival pricing, NLSN is at a -16.76% relative to its price target of 27.44.
When looking at the investment recommendation on say a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell), TJX is given a 1.90 while 2.20 placed for NLSN. This means that analysts are more bullish on the outlook for NLSN stocks.Insider Activity and Investor Sentiment
Short interest or otherwise called the percentage of a stock’s tradable shares currently being shorted is another data that investors use to get a handle on sentiment. The short ratio for TJX is 1.96 while that of NLSN is just 4.61. This means that analysts are more bullish on the forecast for TJX stock.
The stock of The TJX Companies, Inc. defeats that of Nielsen Holdings plc when the two are compared, with TJX taking 7 out of the total factors that were been considered. TJX happens to be more profitable, generates a higher ROI, has higher cash flow per share, higher liquidity and has a lower financial risk. When looking at the stock valuation, TJX is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for TJX is better on when it is viewed on short interest.