Alteryx, Inc. (NYSE:AYX) shares are up more than 26.36% this year and recently increased 2.64% or $0.82 to settle at $31.93. Celanese Corporation (NYSE:CE), on the other hand, is up 3.76% year to date as of 05/16/2018. It currently trades at $111.11 and has returned 1.76% during the past week.
Alteryx, Inc. (NYSE:AYX) and Celanese Corporation (NYSE:CE) are the two most active stocks in the Application Software 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 consistently grow earnings at a high compound rate is a defining characteristic of the best companies for long-term investment. Analysts expect AYX to grow earnings at a 29.30% annual rate over the next 5 years. Comparatively, CE is expected to grow at a 12.33% annual rate. All else equal, AYX’s higher growth rate would imply a greater potential for capital appreciation.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. EBITDA margin of 26.24% for Celanese Corporation (CE). AYX’s ROI is -9.60% while CE has a ROI of 11.90%. The interpretation is that CE’s business generates a higher return on investment than AYX’s.Cash Flow
If there’s one thing investors care more about than earnings, it’s cash flow. AYX’s free cash flow (“FCF”) per share for the trailing twelve months was +0.18. Comparatively, CE’s free cash flow per share was -0.04. On a percent-of-sales basis, AYX’s free cash flow was 0.01% while CE converted -0.09% of its revenues into cash flow. This means that, for a given level of sales, AYX is able to generate more free cash flow for investors.Liquidity and Financial Risk
Balance sheet risk is one of the biggest factors to consider before investing. AYX has a current ratio of 1.80 compared to 1.90 for CE. This means that CE can more easily cover its most immediate liabilities over the next twelve months. AYX’s debt-to-equity ratio is 0.00 versus a D/E of 1.16 for CE. CE is therefore the more solvent of the two companies, and has lower financial risk.Valuation
AYX trades at a P/B of 12.28, and a P/S of 14.06, compared to a forward P/E of 11.10, a P/B of 4.64, and a P/S of 2.34 for CE. AYX is the cheaper of the two stocks on an earnings basis but is expensive in terms of P/B and P/S ratio. 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. AYX is currently priced at a -6.09% to its one-year price target of 34.00. Comparatively, CE is -10.16% relative to its price target of 123.67. This suggests that CE is the better investment over the next year.
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. AYX has a short ratio of 5.16 compared to a short interest of 1.85 for CE. This implies that the market is currently less bearish on the outlook for CE.Summary
Celanese Corporation (NYSE:CE) beats Alteryx, Inc. (NYSE:AYX) on a total of 7 of the 14 factors compared between the two stocks. CE is growing fastly, generates a higher return on investment and higher liquidity. In terms of valuation, CE is the cheaper of the two stocks on book value and sales basis, CE is more undervalued relative to its price target. Finally, CE has better sentiment signals based on short interest.