Vipshop Holdings Limited (NYSE:VIPS) shares are up more than 3.07% this year and recently decreased -19.95% or -$3.01 to settle at $12.08. Agilent Technologies, Inc. (NYSE:A), on the other hand, is down -6.67% year to date as of 05/15/2018. It currently trades at $62.50 and has returned -7.23% during the past week.
Vipshop Holdings Limited (NYSE:VIPS) and Agilent Technologies, Inc. (NYSE:A) are the two most active stocks in the Catalog & Mail Order Houses industry 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 grow earnings at a compound rate over time is a crucial determinant of investment value. Analysts expect VIPS to grow earnings at a 1.25% annual rate over the next 5 years. Comparatively, A is expected to grow at a 10.69% annual rate. All else equal, A’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 24.48% for Agilent Technologies, Inc. (A). VIPS’s ROI is 7.00% while A has a ROI of 10.60%. The interpretation is that A’s business generates a higher return on investment than VIPS’s.Cash Flow
The value of a stock is simply the present value of its future free cash flows. On a percent-of-sales basis, VIPS’s free cash flow was 0% while A converted 2.38% of its revenues into cash flow. This means that, for a given level of sales, A is able to generate more free cash flow for investors.Liquidity and Financial Risk
Liquidity and leverage ratios provide insight into the financial health of a company, and allow investors to determine the likelihood that the company will be able to continue operating as a going concern. VIPS has a current ratio of 1.30 compared to 3.20 for A. This means that A can more easily cover its most immediate liabilities over the next twelve months. VIPS’s debt-to-equity ratio is 0.40 versus a D/E of 0.47 for A. A is therefore the more solvent of the two companies, and has lower financial risk.Valuation
VIPS trades at a forward P/E of 10.72, a P/B of 3.16, and a P/S of 0.70, compared to a forward P/E of 20.87, a P/B of 4.46, and a P/S of 4.37 for A. VIPS 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
Investors often compare a stock’s current price to an analyst price target to get a sense of the potential upside within the next year. VIPS is currently priced at a -39.33% to its one-year price target of 19.91. Comparatively, A is -21.81% relative to its price target of 79.93. This suggests that VIPS 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. VIPS has a beta of 2.32 and A’s beta is 1.32. A’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. VIPS has a short ratio of 1.73 compared to a short interest of 1.89 for A. This implies that the market is currently less bearish on the outlook for VIPS.Summary
Agilent Technologies, Inc. (NYSE:A) beats Vipshop Holdings Limited (NYSE:VIPS) on a total of 8 of the 14 factors compared between the two stocks. A has lower financial risk, is more profitable, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate and higher liquidity. In terms of valuation, VIPS is the cheaper of the two stocks on an earnings, book value and sales basis,