The shares of NVIDIA Corporation have increased by more than 29.07% this year alone. The shares recently went up by 1.81% or $4.43 and now trades at $249.76. The shares of CounterPath Corporation (NASDAQ:CPAH), has jumped by 44.24% year to date as of 03/12/2018. The shares currently trade at $4.63 and have been able to report a change of 25.14% over the past one week.
The stock of NVIDIA Corporation and CounterPath Corporation were two of the most active stocks on Monday. Investors seem to be very interested in what happens to the stocks of these two companies but do investors favor one over the other? We will analyze the growth, profitability, risk, valuation, and insider trends of both companies and see which one investors prefer.
Profitability and Returns
Growth alone cannot be used to see if the company will be valuable. Shareholders will be the losers if a company invest in ventures that aren’t profitable enough to support upbeat growth. In order for us to accurately measure profitability and return, we will be using the EBITDA margin and Return on Investment (ROI), which balances the difference in capital structure. NVDA has an EBITDA margin of 35.61%, this implies that the underlying business of NVDA is more profitable. These figures suggest that NVDA ventures generate a higher ROI than that of CPAH.
The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, NVDA’s free cash flow per share is a positive 9.34, while that of CPAH is negative -0.01.
Liquidity and Financial Risk
The ability of a company to meet up with its short-term obligations and be able to clear its longer-term debts is measured using Liquidity and leverage ratios. The current ratio for NVDA is 8.00 and that of CPAH is 1.30. This implies that it is easier for NVDA to cover its immediate obligations over the next 12 months than CPAH. The debt ratio of NVDA is 0.27 compared to 0.00 for CPAH. NVDA can be able to settle its long-term debts and thus is a lower financial risk than CPAH.
NVDA currently trades at a forward P/E of 34.40, a P/B of 20.22, and a P/S of 15.32 while CPAH trades at a forward P/E of 23.15, a P/B of 2.97, and a P/S of 2.15. This means that looking at the earnings, book values and sales basis, CPAH is the cheaper one. It is very obvious that earnings are the most important factors to investors, thus analysts are most likely to place their bet on the P/E.
Analyst Price Targets and Opinions
The mistake some people make is that they think a cheap stock has more value to it. In order to know the value of a stock, there is need to compare its current price to its likely trading price in the future. The price of NVDA is currently at a -0.54% to its one-year price target of 251.12. Looking at its rival pricing, CPAH is at a 34.2% relative to its price target of 3.45. This figure implies that over the next one year, CPAH is a better investment.
When looking at the investment recommendation on say a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell), NVDA is given a 2.30 while 2.00 placed for CPAH. This means that analysts are more bullish on the outlook for NVDA stocks.
Insider Activity and Investor Sentiment
Short interest or otherwise called the percentage of a stock’s tradable shares currently being shorted is another data that investors use to get a handle on sentiment. The short ratio for NVDA is 0.80 while that of CPAH is just 0.40. This means that analysts are more bullish on the forecast for CPAH stock.
The stock of NVIDIA Corporation defeats that of CounterPath Corporation when the two are compared, with NVDA taking 7 out of the total factors that were been considered. NVDA happens to be more profitable, generates a higher ROI, has higher cash flow per share, higher liquidity and has a lower financial risk. When looking at the stock valuation, NVDA is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for NVDA is better on when it is viewed on short interest.