Ruhnn Holding Limited (RUHN) vs. Stitch Fix, Inc. (SFIX): Comparing the Specialty Retail, Other Industry’s Most Active Stocks

Ruhnn Holding Limited (NASDAQ:RUHN) shares are down more than -9.55% this year and recently decreased -2.34% or -$0.17 to settle at $7.10. Stitch Fix, Inc. (NASDAQ:SFIX), on the other hand, is up 38.97% year to date as of 12/02/2019. It currently trades at $23.75 and has returned 5.18% during the past week.

Ruhnn Holding Limited (NASDAQ:RUHN) and Stitch Fix, Inc. (NASDAQ:SFIX) are the two most active stocks in the Specialty Retail, Other industry based on today’s trading volumes. We will compare the two companies based on the strength of various metrics, including growth, profitability, risk, return, and valuation to determine if one is a better investment than the other.

Growth

The ability to grow earnings at a compound rate over time is a crucial determinant of investment value. Comparatively, SFIX is expected to grow at a 35.55% annual rate. All else equal, SFIX’s higher growth rate would imply a greater potential for capital appreciation.

Profitability and Returns

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. EBITDA margin of 2.5% for Stitch Fix, Inc. (SFIX). RUHN’s ROI is 194.20% while SFIX has a ROI of 7.50%. The interpretation is that RUHN’s business generates a higher return on investment than SFIX’s.

Cash Flow

If there’s one thing investors care more about than earnings, it’s cash flow. On a percent-of-sales basis, RUHN’s free cash flow was 0% while SFIX converted -0.19% of its revenues into cash flow. This means that, for a given level of sales, RUHN 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. RUHN has a current ratio of 0.60 compared to 2.60 for SFIX. This means that SFIX can more easily cover its most immediate liabilities over the next twelve months.

Valuation

RUHN trades at a P/S of 4.19, compared to a forward P/E of 112.03, a P/B of 6.07, and a P/S of 1.56 for SFIX. 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.

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. RUHN has a short ratio of 1.17 compared to a short interest of 9.62 for SFIX. This implies that the market is currently less bearish on the outlook for RUHN.

Summary

Ruhnn Holding Limited (NASDAQ:RUHN) beats Stitch Fix, Inc. (NASDAQ:SFIX) on a total of 7 of the 13 factors compared between the two stocks. RUHN generates a higher return on investment, has higher cash flow per share and has a higher cash conversion rate. In terms of valuation, RUHN is the cheaper of the two stocks on an earnings and book value, Finally, RUHN has better sentiment signals based on short interest.