V.F. Corporation (VFC) and The St. Joe Company (JOE) Go Head-to-head

V.F. Corporation (NYSE:VFC) shares are up more than 31.04% this year and recently decreased -0.62% or -$0.55 to settle at $87.99. The St. Joe Company (NYSE:JOE), on the other hand, is up 44.19% year to date as of 12/02/2019. It currently trades at $18.99 and has returned 10.41% during the past week.

V.F. Corporation (NYSE:VFC) and The St. Joe Company (NYSE:JOE) are the two most active stocks in the Textile – Apparel Clothing 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

The ability to grow earnings at a compound rate over time is a crucial determinant of investment value. Analysts expect VFC to grow earnings at a 5.20% annual rate over the next 5 years.

Profitability and Returns

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 42.17% for The St. Joe Company (JOE). VFC’s ROI is 20.40% while JOE has a ROI of 3.50%. The interpretation is that VFC’s business generates a higher return on investment than JOE’s.

Cash Flow

The value of a stock is simply the present value of its future free cash flows. VFC’s free cash flow (“FCF”) per share for the trailing twelve months was -1.32. Comparatively, JOE’s free cash flow per share was +0.03. On a percent-of-sales basis, VFC’s free cash flow was -3.81% while JOE converted 0% of its revenues into cash flow. This means that, for a given level of sales, JOE is able to generate more free cash flow for investors.

Liquidity and Financial Risk

VFC’s debt-to-equity ratio is 0.56 versus a D/E of 0.51 for JOE. VFC is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

VFC trades at a forward P/E of 22.71, a P/B of 7.53, and a P/S of 2.76, compared to a P/B of 2.22, and a P/S of 11.32 for JOE. VFC is the cheaper of the two stocks on sales basis but is expensive in terms of P/E and P/B 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

A cheap stock isn’t a good investment if the stock is priced accurately. To get a sense of “value” we must compare the current price to some measure of intrinsic value such as a price target. VFC is currently priced at a -13.25% to its one-year price target of 101.43. Comparatively, JOE is -0.05% relative to its price target of 19.00. This suggests that VFC is the better investment over the next year.

Risk and Volatility

To gauge the market risk of a particular stock, investors use beta. Stocks with a beta above 1 are more volatile than the market as a whole. Conversely, a beta below 1 implies below average systematic risk. VFC has a beta of 1.18 and JOE’s beta is 0.98. JOE’s shares are therefore the less volatile of the two stocks.

Insider Activity and Investor Sentiment

Short interest is another tool that analysts use to gauge investor sentiment. It represents the percentage of a stock’s tradable shares that are being shorted. VFC has a short ratio of 4.32 compared to a short interest of 35.55 for JOE. This implies that the market is currently less bearish on the outlook for VFC.

Summary

The St. Joe Company (NYSE:JOE) beats V.F. Corporation (NYSE:VFC) on a total of 8 of the 14 factors compared between the two stocks. JOE is growing fastly, has higher cash flow per share, has a higher cash conversion rate and has lower financial risk. In terms of valuation, JOE is the cheaper of the two stocks on an earnings and book value,