Finance

Comparing Intelsat S.A. (I) and Callon Petroleum Company (CPE)

Intelsat S.A. (NYSE:I) shares are up more than 108.85% this year and recently increased 2.02% or $0.14 to settle at $7.08. Callon Petroleum Company (NYSE:CPE), on the other hand, is up 7.98% year to date as of 04/13/2018. It currently trades at $13.12 and has returned 9.33% during the past week.

Intelsat S.A. (NYSE:I) and Callon Petroleum Company (NYSE:CPE) are the two most active stocks in the Telecom Services industry based on today’s trading volumes. Investors are clearly interested in the two names, but is one a better choice than the other? We will compare the two companies across growth, profitability, risk, valuation, and insider trends to answer this question.

Growth

One of the key things investors look for in a company is the ability to grow earnings at a high compound rate over time. Comparatively, CPE is expected to grow at a 63.07% annual rate. All else equal, CPE’s higher growth rate would imply a greater potential for capital appreciation.

Profitability and Returns

Growth doesn’t mean much if it comes at the cost of weak profitability. To adjust for differences in capital structure we’ll use EBITDA margin and Return on Investment (ROI) as measures of profitability and return. EBITDA margin of 36.63% for Callon Petroleum Company (CPE). I’s ROI is 7.80% while CPE has a ROI of 5.70%. The interpretation is that I’s business generates a higher return on investment than CPE’s.

Cash Flow



Earnings don’t always accurately reflect the amount of cash that a company brings in. I’s free cash flow (“FCF”) per share for the trailing twelve months was -0.29. Comparatively, CPE’s free cash flow per share was -0.37. On a percent-of-sales basis, I’s free cash flow was -1.61% while CPE converted -0.02% of its revenues into cash flow. This means that, for a given level of sales, CPE is able to generate more free cash flow for investors.

Liquidity and Financial Risk

Liquidity and leverage ratios are important because they reveal the financial health of a company. I has a current ratio of 1.10 compared to 0.70 for CPE. This means that I can more easily cover its most immediate liabilities over the next twelve months.

Valuation

I trades at a P/S of 0.39, compared to a forward P/E of 10.91, a P/B of 1.43, and a P/S of 7.23 for CPE. I 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 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. I is currently priced at a 96.12% to its one-year price target of 3.61. Comparatively, CPE is -19.11% relative to its price target of 16.22. This suggests that CPE is the better investment over the next year.

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. I has a beta of 1.01 and CPE’s beta is 1.19. I’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. I has a short ratio of 2.90 compared to a short interest of 9.38 for CPE. This implies that the market is currently less bearish on the outlook for I.

Summary

Intelsat S.A. (NYSE:I) beats Callon Petroleum Company (NYSE:CPE) on a total of 9 of the 14 factors compared between the two stocks. I generates a higher return on investment, has higher cash flow per share, higher liquidity and has lower financial risk. In terms of valuation, I is the cheaper of the two stocks on an earnings, book value and sales basis, Finally, I has better sentiment signals based on short interest.

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