Noble Corporation plc (NYSE:NE) shares are up more than 23.01% this year and recently increased 3.35% or $0.18 to settle at $5.56. Amicus Therapeutics, Inc. (NASDAQ:FOLD), on the other hand, is up 2.22% year to date as of 05/15/2018. It currently trades at $14.71 and has returned 8.32% during the past week.
Noble Corporation plc (NYSE:NE) and Amicus Therapeutics, Inc. (NASDAQ:FOLD) are the two most active stocks in the Oil & Gas Drilling & Exploration industry based on today’s trading volumes. We will compare the two companies based on the strength of various metrics, including growth, profitability, risk, return, and valuation to determine if one is a better investment than the other.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 NE to grow earnings at a 5.99% annual rate over the next 5 years.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 EBITDA margin and Return on Investment (ROI), which adjust for differences in capital structure, as measure of profitability and return. Noble Corporation plc (NE) has an EBITDA margin of 24.51%. This suggests that NE underlying business is more profitable NE’s ROI is -3.40% while FOLD has a ROI of -21.70%. The interpretation is that NE’s business generates a higher return on investment than FOLD’s.Cash Flow
Earnings don’t always accurately reflect the amount of cash that a company brings in. NE’s free cash flow (“FCF”) per share for the trailing twelve months was +0.09. Comparatively, FOLD’s free cash flow per share was -0.29. On a percent-of-sales basis, NE’s free cash flow was 1.8% while FOLD converted -0.15% of its revenues into cash flow. This means that, for a given level of sales, NE 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. NE has a current ratio of 2.40 compared to 4.20 for FOLD. This means that FOLD can more easily cover its most immediate liabilities over the next twelve months. NE’s debt-to-equity ratio is 0.77 versus a D/E of 0.32 for FOLD. NE is therefore the more solvent of the two companies, and has lower financial risk.Valuation
NE trades at a P/B of 0.27, and a P/S of 1.23, compared to a P/B of 4.97, and a P/S of 55.10 for FOLD. 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”. NE is currently priced at a 21.66% to its one-year price target of 4.57. Comparatively, FOLD is -26.19% relative to its price target of 19.93. This suggests that FOLD is the better investment over the next year.
Risk and Volatility
Beta is an important measure that gives investors a sense of the market risk associated with a particular stock. A beta above 1 signals above average market risk, while a beta below 1 implies below average volatility. NE has a beta of 2.15 and FOLD’s beta is 1.44. FOLD’s shares are therefore the less volatile of the two stocks.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. NE has a short ratio of 9.26 compared to a short interest of 10.36 for FOLD. This implies that the market is currently less bearish on the outlook for NE.Summary
Noble Corporation plc (NYSE:NE) beats Amicus Therapeutics, Inc. (NASDAQ:FOLD) on a total of 8 of the 14 factors compared between the two stocks. NE is growing fastly, is more profitable, generates a higher return on investment, has higher cash flow per share and has a higher cash conversion rate. In terms of valuation, NE is the cheaper of the two stocks on book value and sales basis, Finally, NE has better sentiment signals based on short interest.