Teekay Tankers Ltd. (NYSE:TNK) shares are up more than 106.90% this year and recently decreased -1.54% or -$0.03 to settle at $1.92. Sysco Corporation (NYSE:SYY), on the other hand, is up 29.11% year to date as of 11/07/2019. It currently trades at $80.90 and has returned 1.29% during the past week.
Teekay Tankers Ltd. (NYSE:TNK) and Sysco Corporation (NYSE:SYY) are the two most active stocks in the Shipping 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.
The ability to consistently grow earnings at a high compound rate is a defining characteristic of the best companies for long-term investment. Analysts expect TNK to grow earnings at a 3.00% annual rate over the next 5 years. Comparatively, SYY is expected to grow at a 10.55% annual rate. All else equal, SYY’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 3.97% for Sysco Corporation (SYY). TNK’s ROI is 0.40% while SYY has a ROI of 18.90%. The interpretation is that SYY’s business generates a higher return on investment than TNK’s.Cash Flow
If there’s one thing investors care more about than earnings, it’s cash flow. On a percent-of-sales basis, TNK’s free cash flow was 0% while SYY converted 0.88% of its revenues into cash flow. This means that, for a given level of sales, SYY is able to generate more free cash flow for investors.
Liquidity and leverage ratios are important because they reveal the financial health of a company. TNK has a current ratio of 1.00 compared to 1.30 for SYY. This means that SYY can more easily cover its most immediate liabilities over the next twelve months. TNK’s debt-to-equity ratio is 1.13 versus a D/E of 3.26 for SYY. SYY is therefore the more solvent of the two companies, and has lower financial risk.Valuation
TNK trades at a forward P/E of 3.61, a P/B of 0.54, and a P/S of 0.58, compared to a forward P/E of 19.43, a P/B of 16.65, and a P/S of 0.69 for SYY. TNK is the cheaper 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
Just because a stock is cheaper doesn’t mean there’s more value to be had. In order to assess value we need to compare the current price to where it’s likely to trade in the future. TNK is currently priced at a -8.57% to its one-year price target of 2.10. Comparatively, SYY is 4.08% relative to its price target of 77.73. This suggests that TNK is the better investment over the next year.
Risk and Volatility
Beta is an important measure that gives investors a sense of the market risk associated with a particular stock. A beta above 1 signals above average market risk, while a beta below 1 implies below average volatility. TNK has a beta of 1.16 and SYY’s beta is 0.47. SYY’s shares are therefore the less volatile of the two stocks.Insider Activity and Investor Sentiment
Comparing the number of shares sold short to the float is a method analysts often use to get a reading on investor sentiment. TNK has a short ratio of 1.09 compared to a short interest of 3.88 for SYY. This implies that the market is currently less bearish on the outlook for TNK.
Sysco Corporation (NYSE:SYY) beats Teekay Tankers Ltd. (NYSE:TNK) on a total of 7 of the 14 factors compared between the two stocks. SYY has lower financial risk, is more profitable, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate and higher liquidity. In terms of valuation, TNK is the cheaper of the two stocks on an earnings, book value and sales basis,