We think that Comcast stock (NASDAQ: CMCSA) currently is a better pick compared to UPS stock (NYSE: UPS). CMCSA stock is trading at 1.6x trailing revenues, marginally above 1.4x for UPS. Although these two companies are from different industries, we compare them due to their similar revenue base.
If we look at stock returns, UPS’ -15% return is better than a -22% change for CMCSA stock over the last twelve months. This compares with a -2% change in the broader S&P 500 index. While UPS stock has been weighed down due to rising costs and fears of a recession, Comcast stock has seen a fall partly due to rising cable subscriber losses, and a slowdown in broadband subscriber growth in the recent past. While both the companies are likely to see stock price appreciation, Comcast is expected to outperform. There is more to the comparison, and in the sections below, we discuss why we believe that CMCSA stock will offer better returns than UPS stock in the next three years. We compare a slew of factors such as historical revenue growth, returns, and valuation multiple in an interactive dashboard analysis of UPS vs. Comcast: Which Stock Is A Better Bet? Parts of the analysis are summarized below.
1. UPS’ Revenue Growth Has Been Stronger Over The Recent Years
- UPS’ revenue growth of 10% over the last twelve months is lower than 15% for Comcast.
- Looking at a longer time frame, UPS’ sales grew at an average growth rate of 11% to $97.3 billion in 2021, compared to $71.9 billion in 2018, while that of Comcast grew at 8% to $116.4 billion in 2021, compared to $94.5 billion in 2018.
- UPS’ revenue growth over the recent years was driven by shelter-in-place restrictions and the spread of the Covid-19 virus, resulting in more online orders, aiding its ground shipments. However, this trend is now cooling off, reflecting on revenue growth rates.
- For Comcast, revenue growth over the recent years was driven by the big surge in its broadband business through the Covid-19 pandemic, due to the work from home trend, which appears to be cooling off now. The company reported only 180,000 subscribers additions (adjusted for free subscribers) in Q1 2022, a sharp decline from 461,000 in the year-ago quarter.
- Our UPS Revenue and Comcast Revenue dashboards provide more insight into the companies’ sales.
- Looking forward, Comcast’s revenue growth over the next three years is expected to be better than UPS. The table below summarizes our revenue expectations for the two companies over the next three years. It points to a CAGR of 8% for Comcast, compared to a 6% CAGR for UPS, based on Trefis Machine Learning analysis.
- Note that we have different methodologies for companies that are negatively impacted by Covid and those that are not impacted or positively impacted by Covid while forecasting future revenues. For companies negatively affected by Covid, we consider the quarterly revenue recovery trajectory to forecast recovery to the pre-Covid revenue run rate. Beyond the recovery point, we apply the average annual growth observed in the three years before Covid to simulate a return to normal conditions. For companies registering positive revenue growth during Covid, we consider yearly average growth before Covid with a certain weight to growth during Covid and the last twelve months.
2. Comcast Is More Profitable, But Comes With Higher Risk
- Comcast’s operating margin of 23% over the last twelve-month period is much better than 13% for UPS.
- This compares with 24% and 11% figures seen in 2019, before the pandemic, respectively.
- Comcast’s free cash flow margin of 24% is better than 13% for UPS.
- Our UPS Operating Income and Comcast Operating Income dashboards have more details.
- Looking at financial risk, UPS is better placed among the two. Its debt as a percentage of equity of 14% is much lower than 48% for Comcast, while its 18% cash as a percentage of assets is higher than the 3% for the latter, implying that UPS has a better debt position and has more cash cushion.
3. The Net of It All
- We see that UPS has demonstrated better revenue growth over the recent years and it offers a comparatively lower financial risk with better debt and cash position. On the other hand, Comcast is more profitable.
- Now, looking at prospects, using P/S as a base, due to high fluctuations in P/E and P/EBIT, we believe Comcast is currently the better choice of the two.
- The table below summarizes our revenue and return expectations for UPS and Comcast over the next three years and points to an expected return of 31% for Comcast over this period vs. a 7% expected return for UPS stock, implying that investors are better off buying CMCSA over UPS, based on Trefis Machine Learning analysis – UPS vs. Comcast – which also provides more details on how we arrive at these numbers.
While CMCSA stock may outperform UPS, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for UPS vs. Williams-Sonoma.
|S&P 500 Return||0%||-13%||85%|
|Trefis Multi-Strategy Portfolio||1%||-18%||223%|
 Month-to-date and year-to-date as of 6/1/2022
 Cumulative total returns since the end of 2016