FireEye, Inc. (NASDAQ:FEYE) shares are up more than 41.26% this year and recently decreased -0.06% or -$0.01 to settle at $16.81. Box, Inc. (NYSE:BOX), on the other hand, is up 55.34% year to date as of 10/20/2017. It currently trades at $21.53 and has returned 6.53% during the past week.
FireEye, Inc. (NASDAQ:FEYE) and Box, Inc. (NYSE:BOX) are the two most active stocks in the Application Software 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.
One of the key things investors look for in a company is the ability to grow earnings at a high compound rate over time. Analysts expect FEYE to grow earnings at a 15.00% annual rate over the next 5 years. Comparatively, BOX is expected to grow at a -0.41% annual rate. All else equal, FEYE’s higher growth rate would imply a greater potential for capital appreciation.
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 Return on Investment (ROI), which adjust for differences in capital structure, as measure of profitability and return. FEYE’s ROI is -27.50% while BOX has a ROI of -101.00%. The interpretation is that FEYE’s business generates a higher return on investment than BOX’s.
The value of a stock is simply the present value of its future free cash flows. FEYE’s free cash flow (“FCF”) per share for the trailing twelve months was -0.11. Comparatively, BOX’s free cash flow per share was -0.08. On a percent-of-sales basis, FEYE’s free cash flow was -0% while BOX converted -0% of its revenues into cash flow. This means that, for a given level of sales, FEYE is able to generate more free cash flow for investors.
Liquidity and Financial Risk
Balance sheet risk is one of the biggest factors to consider before investing. FEYE has a current ratio of 2.10 compared to 1.00 for BOX. This means that FEYE can more easily cover its most immediate liabilities over the next twelve months. FEYE’s debt-to-equity ratio is 0.96 versus a D/E of 1.99 for BOX. BOX is therefore the more solvent of the two companies, and has lower financial risk.
FEYE trades at a P/B of 3.74, and a P/S of 4.20, compared to a P/B of 67.28, and a P/S of 6.08 for BOX. 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
When investing it’s crucial to distinguish between price and value. As Warren Buffet said, “price is what you pay, value is what you get”. FEYE is currently priced at a -4.05% to its one-year price target of 17.52. Comparatively, BOX is -11.94% relative to its price target of 24.45. This suggests that BOX 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 2.50 for FEYE and 1.80 for BOX, which implies that analysts are more bullish on the outlook for FEYE.
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.FEYE has a short ratio of 6.33 compared to a short interest of 3.31 for BOX. This implies that the market is currently less bearish on the outlook for BOX.
FireEye, Inc. (NASDAQ:FEYE) beats Box, Inc. (NYSE:BOX) on a total of 6 of the 14 factors compared between the two stocks. FEYE is growing fastly, generates a higher return on investment, higher liquidity and has lower financial risk. In terms of valuation, FEYE is the cheaper of the two stocks on book value and sales basis, Finally, ADBE has better sentiment signals based on short interest.