Bristow Group Inc. (NYSE:BRS) shares are up more than 15.81% this year and recently increased 10.40% or $1.47 to settle at $15.60. TETRA Technologies, Inc. (NYSE:TTI), on the other hand, is down -17.10% year to date as of 02/12/2018. It currently trades at $3.54 and has returned -7.57% during the past week.
Bristow Group Inc. (NYSE:BRS) and TETRA Technologies, Inc. (NYSE:TTI) are the two most active stocks in the Oil & Gas Equipment & Services 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.
Profitability and Returns
A high growth rate isn’t necessarily valuable to investors. In fact, companies that overinvest in low return projects just to achieve a high growth rate can actually destroy shareholder value. Profitability and returns are a measure of the quality of a company’s business and its growth opportunities. We’ll use EBITDA margin and Return on Investment (ROI) to measure this. EBITDA margin of 17.56% for TETRA Technologies, Inc. (TTI). BRS’s ROI is -4.80% while TTI has a ROI of -18.50%. The interpretation is that BRS’s business generates a higher return on investment than TTI’s.
Cash is king when it comes to investing. BRS’s free cash flow (“FCF”) per share for the trailing twelve months was +0.39. Comparatively, TTI’s free cash flow per share was +0.19. On a percent-of-sales basis, BRS’s free cash flow was 0.98% while TTI converted 0% of its revenues into cash flow. This means that, for a given level of sales, BRS 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. BRS has a current ratio of 1.50 compared to 2.20 for TTI. This means that TTI can more easily cover its most immediate liabilities over the next twelve months. BRS’s debt-to-equity ratio is 0.96 versus a D/E of 0.00 for TTI. BRS is therefore the more solvent of the two companies, and has lower financial risk.
BRS trades at a P/B of 0.44, and a P/S of 0.40, compared to a forward P/E of 84.29, a P/B of 1.72, and a P/S of 0.53 for TTI. BRS 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
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. BRS is currently priced at a -0.45% to its one-year price target of 15.67. Comparatively, TTI is -32.7% relative to its price target of 5.26. This suggests that TTI 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 2.80 for BRS and 2.10 for TTI, which implies that analysts are more bullish on the outlook for BRS.
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. BRS has a beta of 2.76 and TTI’s beta is 0.79. TTI’s shares are therefore the less volatile of the two stocks.
Insider Activity and Investor Sentiment
Short interest is another tool that analysts use to gauge investor sentiment. It represents the percentage of a stock’s tradable shares that are being shorted. BRS has a short ratio of 9.51 compared to a short interest of 4.31 for TTI. This implies that the market is currently less bearish on the outlook for TTI.
TETRA Technologies, Inc. (NYSE:TTI) beats Bristow Group Inc. (NYSE:BRS) on a total of 7 of the 14 factors compared between the two stocks. TTI generates a higher return on investment, higher liquidity and has lower financial risk. In terms of valuation, BRS is the cheaper of the two stocks on an earnings, book value and sales basis, TTI is more undervalued relative to its price target. Finally, TTI has better sentiment signals based on short interest.