Hecla Mining Company (NYSE:HL) shares are down more than -3.44% this year and recently increased 0.60% or $0.03 to settle at $5.06. Coeur Mining, Inc. (NYSE:CDE), on the other hand, is down -7.92% year to date as of 10/19/2017. It currently trades at $8.37 and has returned -7.82% during the past week.
Hecla Mining Company (NYSE:HL) and Coeur Mining, Inc. (NYSE:CDE) are the two most active stocks in the Silver industry based on today’s trading volumes. To determine if one is a better investment than the other, we will compare the two companies’ growth, profitability, risk, return, and valuation characteristics, as well as their analyst ratings and sentiment signals.
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. , compared to an EBITDA margin of 29.24% for Coeur Mining, Inc. (CDE). HL’s ROI is 4.50% while CDE has a ROI of 10.30%. The interpretation is that CDE’s business generates a higher return on investment than HL’s.
Earnings don’t always accurately reflect the amount of cash that a company brings in. HL’s free cash flow (“FCF”) per share for the trailing twelve months was -0.05. Comparatively, CDE’s free cash flow per share was -0.05. On a percent-of-sales basis, HL’s free cash flow was -0% while CDE converted -0% of its revenues into cash flow. This means that, for a given level of sales, HL is able to generate more free cash flow for investors.
Liquidity and Financial Risk
Liquidity and leverage ratios measure a company’s ability to meet short-term obligations and longer-term debts. HL has a current ratio of 2.60 compared to 4.10 for CDE. This means that CDE can more easily cover its most immediate liabilities over the next twelve months. HL’s debt-to-equity ratio is 0.34 versus a D/E of 0.37 for CDE. CDE is therefore the more solvent of the two companies, and has lower financial risk.
HL trades at a forward P/E of 26.08, a P/B of 1.34, and a P/S of 3.24, compared to a forward P/E of 17.85, a P/B of 1.93, and a P/S of 2.16 for CDE. HL is the cheaper of the two stocks on book value basis but is expensive in terms of P/E and P/S 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. HL is currently priced at a -14.24% to its one-year price target of 5.90. Comparatively, CDE is -28.4% relative to its price target of 11.69. This suggests that CDE 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 2.90 for HL and 2.30 for CDE, which implies that analysts are more bullish on the outlook for HL.
Risk and Volatility
Analyst use beta to measure a stock’s volatility relative to the overall market. Stocks with a beta above 1 tend to have bigger swings in price than the market as a whole, the opposite being the case for stocks with a beta below 1. HL has a beta of 0.34 and CDE’s beta is 0.46. HL’s shares are therefore the less volatile of the two stocks.
Insider Activity and Investor Sentiment
The analysis of insider buying and selling trends can be extended to the aggregate level. Short interest, which represents the percentage of a stock’s tradable shares currently being shorted, captures what the market as a whole feels about a stock. HL has a short ratio of 3.70 compared to a short interest of 4.77 for CDE. This implies that the market is currently less bearish on the outlook for HL.
Coeur Mining, Inc. (NYSE:CDE) beats Hecla Mining Company (NYSE:HL) on a total of 7 of the 14 factors compared between the two stocks. CDE has lower financial risk, generates a higher return on investment and higher liquidity. In terms of valuation, CDE is the cheaper of the two stocks on an earnings and sales basis, CDE is more undervalued relative to its price target. Finally, TER has better sentiment signals based on short interest.