Finance

Comparing Marathon Patent Group, Inc. (MARA) and Alaska Air Group, Inc. (ALK)

Marathon Patent Group, Inc. (NASDAQ:MARA) shares are down more than -63.41% this year and recently increased 5.63% or $0.08 to settle at $1.50. Alaska Air Group, Inc. (NYSE:ALK), on the other hand, is down -13.01% year to date as of 04/13/2018. It currently trades at $63.95 and has returned 5.23% during the past week.

Marathon Patent Group, Inc. (NASDAQ:MARA) and Alaska Air Group, Inc. (NYSE:ALK) are the two most active stocks in the Business Services industry 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.

Growth

The ability to grow earnings at a compound rate over time is a crucial determinant of investment value. Analysts expect MARA to grow earnings at a 50.00% annual rate over the next 5 years. Comparatively, ALK is expected to grow at a 9.58% annual rate. All else equal, MARA’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. EBITDA margin of 20.12% for Alaska Air Group, Inc. (ALK). MARA’s ROI is -265.70% while ALK has a ROI of 12.80%. The interpretation is that ALK’s business generates a higher return on investment than MARA’s.

Cash Flow



Earnings don’t always accurately reflect the amount of cash that a company brings in. MARA’s free cash flow (“FCF”) per share for the trailing twelve months was -1.29. Comparatively, ALK’s free cash flow per share was +0.09. On a percent-of-sales basis, MARA’s free cash flow was -0.05% while ALK converted 0.14% of its revenues into cash flow. This means that, for a given level of sales, ALK 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. MARA has a current ratio of 0.20 compared to 0.80 for ALK. This means that ALK can more easily cover its most immediate liabilities over the next twelve months.

Valuation

MARA trades at a P/S of 26.76, compared to a forward P/E of 8.80, a P/B of 2.10, and a P/S of 0.94 for ALK. 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

When investing it’s crucial to distinguish between price and value. As Warren Buffet said, “price is what you pay, value is what you get”. MARA is currently priced at a -62.5% to its one-year price target of 4.00. Comparatively, ALK is -18.22% relative to its price target of 78.20. This suggests that MARA is the better investment over the next year.

Risk and Volatility

To gauge the market risk of a particular stock, investors use beta. Stocks with a beta above 1 are more volatile than the market as a whole. Conversely, a beta below 1 implies below average systematic risk. MARA has a beta of 2.38 and ALK’s beta is 0.76. ALK’s shares are therefore the less volatile of the two stocks.

Insider Activity and Investor Sentiment




Short interest, or the percentage of a stock’s tradable shares currently being shorted, is another metric investors use to get a pulse on sentiment. MARA has a short ratio of 1.19 compared to a short interest of 2.55 for ALK. This implies that the market is currently less bearish on the outlook for MARA.

Summary

Alaska Air Group, Inc. (NYSE:ALK) beats Marathon Patent Group, Inc. (NASDAQ:MARA) on a total of 7 of the 14 factors compared between the two stocks. ALK is growing fastly, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate and higher liquidity. Finally, CRON has better sentiment signals based on short interest.

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