Cousins Properties Incorporated (NYSE:CUZ) shares are up more than 26.87% this year and recently decreased -0.99% or -$0.4 to settle at $40.09. Highwoods Properties, Inc. (NYSE:HIW), on the other hand, is up 22.74% year to date as of 12/02/2019. It currently trades at $47.49 and has returned 1.67% during the past week.
Cousins Properties Incorporated (NYSE:CUZ) and Highwoods Properties, Inc. (NYSE:HIW) are the two most active stocks in the REIT – 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.
The ability to consistently grow earnings at a high compound rate is a defining characteristic of the best companies for long-term investment. Comparatively, HIW is expected to grow at a 8.00% annual rate. All else equal, HIW’s higher growth rate would imply a greater potential for capital appreciation.
Growth doesn’t mean much if it comes at the cost of weak profitability. To adjust for differences in capital structure we’ll use EBITDA margin and Return on Investment (ROI) as measures of profitability and return. , compared to an EBITDA margin of 63.13% for Highwoods Properties, Inc. (HIW).Cash Flow
Cash is king when it comes to investing. CUZ’s free cash flow (“FCF”) per share for the trailing twelve months was -0.04. Comparatively, HIW’s free cash flow per share was +0.22. On a percent-of-sales basis, CUZ’s free cash flow was -0% while HIW converted 0% of its revenues into cash flow. This means that, for a given level of sales, CUZ is able to generate more free cash flow for investors.
CUZ’s debt-to-equity ratio is 0.43 versus a D/E of 1.09 for HIW. HIW is therefore the more solvent of the two companies, and has lower financial risk.
CUZ trades at a forward P/E of 114.54, a P/B of 1.37, and a P/S of 10.13, compared to a forward P/E of 35.44, a P/B of 2.32, and a P/S of 6.81 for HIW. CUZ is the cheaper of the two stocks on book value basis but is expensive in terms of P/E and P/S ratio. 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. CUZ is currently priced at a -8.47% to its one-year price target of 43.80. Comparatively, HIW is -3.26% relative to its price target of 49.09. This suggests that CUZ is the better investment over the next year.
Risk and Volatility
Analyst use beta to measure a stock’s volatility relative to the overall market. Stocks with a beta above 1 tend to have bigger swings in price than the market as a whole, the opposite being the case for stocks with a beta below 1. CUZ has a beta of 0.87 and HIW’s beta is 0.80. HIW’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. CUZ has a short ratio of 4.28 compared to a short interest of 3.30 for HIW. This implies that the market is currently less bearish on the outlook for HIW.
Highwoods Properties, Inc. (NYSE:HIW) beats Cousins Properties Incorporated (NYSE:CUZ) on a total of 8 of the 14 factors compared between the two stocks. HIW higher liquidity, is more profitable, generates a higher return on investment and has higher cash flow per share. In terms of valuation, HIW is the cheaper of the two stocks on an earnings and sales basis, Finally, HIW has better sentiment signals based on short interest.