Cameco Corporation (NYSE:CCJ) and Compania de Minas Buenaventura S.A.A. (NYSE:BVN) are the two most active stocks in the Industrial Metals & Minerals 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.
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 Return on Investment (ROI) as measures of profitability and return. CCJ’s ROI is -0.70% while BVN has a ROI of 2.30%. The interpretation is that BVN’s business generates a higher return on investment than CCJ’s.
The value of a stock is simply the present value of its future free cash flows. CCJ’s free cash flow (“FCF”) per share for the trailing twelve months was +0.10. Comparatively, BVN’s free cash flow per share was -0.66. On a percent-of-sales basis, CCJ’s free cash flow was 2.16% while BVN converted -15.68% of its revenues into cash flow. This means that, for a given level of sales, CCJ is able to generate more free cash flow for investors.
Liquidity and Financial Risk
Analysts look at liquidity and leverage ratios to assess how easily a company can cover its liabilities. CCJ has a current ratio of 5.80 compared to 1.20 for BVN. This means that CCJ can more easily cover its most immediate liabilities over the next twelve months. CCJ’s debt-to-equity ratio is 0.00 versus a D/E of 0.26 for BVN. BVN is therefore the more solvent of the two companies, and has lower financial risk.
CCJ trades at a forward P/E of 20.80, a P/B of 0.95, and a P/S of 2.02, compared to a forward P/E of 12.18, a P/B of 1.21, and a P/S of 3.41 for BVN. 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. CCJ is currently priced at a -19.81% to its one-year price target of $12.32. Comparatively, BVN is -4.33% relative to its price target of $14.32. This suggests that CCJ is the better investment over the next year.
The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 2.40 for CCJ and 2.60 for BVN, which implies that analysts are more bullish on the outlook for BVN.
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. CCJ has a beta of 1.25 and BVN’s beta is 0.99. BVN’s shares are therefore the less volatile of the two stocks.
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. CCJ has a short ratio of 10.93 compared to a short interest of 0.72 for BVN. This implies that the market is currently less bearish on the outlook for BVN.
Cameco Corporation (NYSE:CCJ) beats Compania de Minas Buenaventura S.A.A. (NYSE:BVN) on a total of 8 of the 12 factors compared between the two stocks. CCJ has higher cash flow per share, has a higher cash conversion rate, higher liquidity and has lower financial risk. In terms of valuation, CCJ is the cheaper of the two stocks on book value and sales basis, CCJ is more undervalued relative to its price target. Finally, PE has better sentiment signals based on short interest.