Nutanix, Inc. (NASDAQ:NTNX) shares are up more than 2.61% this year and recently decreased -0.69% or -$0.25 to settle at $36.20. MannKind Corporation (NASDAQ:MNKD), on the other hand, is up 22.41% year to date as of 03/01/2018. It currently trades at $2.84 and has returned -4.70% during the past week.
Nutanix, Inc. (NASDAQ:NTNX) and MannKind Corporation (NASDAQ:MNKD) are the two most active stocks in the market 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.
The ability to consistently grow earnings at a high compound rate is a defining characteristic of the best companies for long-term investment. Comparatively, MNKD is expected to grow at a 26.80% annual rate. All else equal, MNKD’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. NTNX’s ROI is -198.80% while MNKD has a ROI of -396.80%. The interpretation is that NTNX’s business generates a higher return on investment than MNKD’s.
Cash is king when it comes to investing. NTNX’s free cash flow (“FCF”) per share for the trailing twelve months was -0.05. Comparatively, MNKD’s free cash flow per share was -0.22. On a percent-of-sales basis, NTNX’s free cash flow was -0% while MNKD converted -0.02% of its revenues into cash flow. This means that, for a given level of sales, NTNX 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. NTNX has a current ratio of 1.90 compared to 0.30 for MNKD. This means that NTNX can more easily cover its most immediate liabilities over the next twelve months.
NTNX trades at a P/B of 26.23, and a P/S of 6.49, compared to a P/S of 16.32 for MNKD. NTNX is the cheaper of the two stocks on sales basis but is expensive in terms of P/E and P/B 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
Investors often compare a stock’s current price to an analyst price target to get a sense of the potential upside within the next year. NTNX is currently priced at a -10% to its one-year price target of 40.22. Comparatively, MNKD is -59.43% relative to its price target of 7.00. This suggests that MNKD 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 2.10 for NTNX and 2.50 for MNKD, which implies that analysts are more bullish on the outlook for MNKD.
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. NTNX has a short ratio of 1.92 compared to a short interest of 8.40 for MNKD. This implies that the market is currently less bearish on the outlook for NTNX.
Nutanix, Inc. (NASDAQ:NTNX) beats MannKind Corporation (NASDAQ:MNKD) on a total of 8 of the 14 factors compared between the two stocks. NTNX generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate and higher liquidity. Finally, NTNX has better sentiment signals based on short interest.