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A Side-by-side Analysis of The Stars Group Inc. (TSG) and CARBO Ceramics Inc. (CRR)

The Stars Group Inc. (NASDAQ:TSG) shares are up more than 59.44% this year and recently increased 3.92% or $1.4 to settle at $37.15. CARBO Ceramics Inc. (NYSE:CRR), on the other hand, is up 11.79% year to date as of 05/16/2018. It currently trades at $11.38 and has returned 10.59% during the past week.

The Stars Group Inc. (NASDAQ:TSG) and CARBO Ceramics Inc. (NYSE:CRR) are the two most active stocks in the Gaming Activities 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

Companies that can increase earnings at a high compound rate over time are attractive to investors. Comparatively, CRR is expected to grow at a 10.00% annual rate. All else equal, CRR’s higher growth rate would imply a greater potential for capital appreciation.

Cash Flow

If there’s one thing investors care more about than earnings, it’s cash flow. TSG’s free cash flow (“FCF”) per share for the trailing twelve months was +0.59. Comparatively, CRR’s free cash flow per share was -0.28. On a percent-of-sales basis, TSG’s free cash flow was 6.82% while CRR converted -0% of its revenues into cash flow. This means that, for a given level of sales, TSG is able to generate more free cash flow for investors.

Valuation

TSG trades at a forward P/E of 15.10, a P/B of 3.39, and a P/S of 4.17, compared to a P/B of 0.79, and a P/S of 1.50 for CRR. TSG is the expensive 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

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”. TSG is currently priced at a 33.73% to its one-year price target of 27.78. Comparatively, CRR is 37.94% relative to its price target of 8.25. This suggests that TSG is the better investment over the next year.

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. TSG has a short ratio of 1.89 compared to a short interest of 21.19 for CRR. This implies that the market is currently less bearish on the outlook for TSG.

Summary

The Stars Group Inc. (NASDAQ:TSG) beats CARBO Ceramics Inc. (NYSE:CRR) on a total of 7 of the 14 factors compared between the two stocks. TSG generates a higher return on investment, has higher cash flow per share and has a higher cash conversion rate. TSG is more undervalued relative to its price target. Finally, TSG has better sentiment signals based on short interest.

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