Micron Technology, Inc. (NASDAQ:MU) shares are up more than 35.12% this year and recently increased 2.49% or $1.35 to settle at $55.56. Schlumberger Limited (NYSE:SLB), on the other hand, is down -4.35% year to date as of 03/26/2018. It currently trades at $64.46 and has returned -0.37% during the past week.

Micron Technology, Inc. (NASDAQ:MU) and Schlumberger Limited (NYSE:SLB) are the two most active stocks in the market 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.

**Growth**

The ability to consistently grow earnings at a high compound rate is a defining characteristic of the best companies for long-term investment. Analysts expect MU to grow earnings at a 30.33% annual rate over the next 5 years. Comparatively, SLB is expected to grow at a 54.20% annual rate. All else equal, SLB’s higher growth rate would imply a greater potential for capital appreciation.

**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., compared to an EBITDA margin of 5.77% for Schlumberger Limited (SLB). MU’s ROI is 19.20% while SLB has a ROI of -2.20%. The interpretation is that MU’s business generates a higher return on investment than SLB’s.

**Cash Flow **

Cash is king when it comes to investing. MU’s free cash flow (“FCF”) per share for the trailing twelve months was +1.56. Comparatively, SLB’s free cash flow per share was +0.67. On a percent-of-sales basis, MU’s free cash flow was 8.88% while SLB converted 3.05% of its revenues into cash flow. This means that, for a given level of sales, MU 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. MU has a current ratio of 2.40 compared to 1.20 for SLB. This means that MU can more easily cover its most immediate liabilities over the next twelve months. MU’s debt-to-equity ratio is 0.40 versus a D/E of 0.49 for SLB. SLB is therefore the more solvent of the two companies, and has lower financial risk.

**Valuation**

MU trades at a forward P/E of 5.76, a P/B of 2.80, and a P/S of 3.02, compared to a forward P/E of 20.25, a P/B of 2.43, and a P/S of 3.00 for SLB. MU is the cheaper of the two stocks on an earnings basis but is expensive in terms of P/B 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 is not necessarily a value stock. Most of the time, a stock is cheap for good reason. A stock only has value if the current price is substantially below the price at which it should trade in the future. MU is currently priced at a -16.68% to its one-year price target of 66.68. Comparatively, SLB is -21.28% relative to its price target of 81.89. This suggests that SLB 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 1.80 for MU and 2.00 for SLB, which implies that analysts are more bullish on the outlook for SLB.

**Risk and Volatility**

No discussion on value is complete without taking into account risk. Analysts use a stock’s beta, which measures the volatility of a stock compared to the overall market, to measure systematic risk. A stock with a beta above 1 is more volatile than the market. Conversely, a beta below 1 implies a below average level of risk. MU has a beta of 1.21 and SLB’s beta is 1.07. SLB’s shares are therefore the less volatile of the two stocks.

**Insider Activity and Investor Sentiment**

Analysts often look at short interest, or the percentage of a company’s float currently being shorted by investors, to aid in their outlook for a particular stock. MU has a short ratio of 1.23 compared to a short interest of 2.65 for SLB. This implies that the market is currently less bearish on the outlook for MU.

**Summary**

Micron Technology, Inc. (NASDAQ:MU) beats Schlumberger Limited (NYSE:SLB) on a total of 9 of the 14 factors compared between the two stocks. MU is more profitable, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate, higher liquidity and has lower financial risk. Finally, MU has better sentiment signals based on short interest.