Palatin Technologies, Inc. (NYSE:PTN) shares are up more than 45.53% this year and recently increased 3.31% or $0.04 to settle at $1.25. MasTec, Inc. (NYSE:MTZ), on the other hand, is up 3.06% year to date as of 05/16/2018. It currently trades at $50.45 and has returned 4.24% during the past week.
Palatin Technologies, Inc. (NYSE:PTN) and MasTec, Inc. (NYSE:MTZ) are the two most active stocks in the Diagnostic Substances industry based on today’s trading volumes. Investors are clearly interested in the two names, but is one a better choice than the other? We will compare the two companies across growth, profitability, risk, valuation, and insider trends to answer this question.Growth
One of the key things investors look for in a company is the ability to grow earnings at a high compound rate over time. Comparatively, MTZ is expected to grow at a 15.71% annual rate. All else equal, MTZ’s higher growth rate would imply a greater potential for capital appreciation.Profitability and Returns
Just, if not more, important than the growth rate is the quality of that growth. Growth can actual be harmful to investors if it comes at the cost of weak profitability and low returns. To adjust for differences in capital structure we’ll use EBITDA margin and Return on Investment (ROI) as measures of profitability and return., compared to an EBITDA margin of 7.88% for MasTec, Inc. (MTZ). PTN’s ROI is -124.40% while MTZ has a ROI of 9.60%. The interpretation is that MTZ’s business generates a higher return on investment than PTN’s.Cash Flow
Cash is king when it comes to investing. PTN’s free cash flow (“FCF”) per share for the trailing twelve months was -0.01. Comparatively, MTZ’s free cash flow per share was +0.74. On a percent-of-sales basis, PTN’s free cash flow was -0% while MTZ converted 0.9% of its revenues into cash flow. This means that, for a given level of sales, MTZ 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. PTN has a current ratio of 1.50 compared to 1.80 for MTZ. This means that MTZ can more easily cover its most immediate liabilities over the next twelve months. PTN’s debt-to-equity ratio is 1.06 versus a D/E of 1.04 for MTZ. PTN is therefore the more solvent of the two companies, and has lower financial risk.Valuation
PTN trades at a P/B of 25.00, and a P/S of 3.00, compared to a forward P/E of 12.14, a P/B of 2.99, and a P/S of 0.59 for MTZ. PTN 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
Just because a stock is cheaper doesn’t mean there’s more value to be had. In order to assess value we need to compare the current price to where it’s likely to trade in the future. PTN is currently priced at a -77.27% to its one-year price target of 5.50. Comparatively, MTZ is -20.79% relative to its price target of 63.69. This suggests that PTN is the better investment over the next year.
Risk and Volatility
Beta is a metric that investors frequently use to analyze a stock’s systematic risk. A beta above 1 implies above average market volatility. Conversely, a stock with a beta below 1 is seen as less risky than the overall market. PTN has a beta of 1.72 and MTZ’s beta is 1.56. MTZ’s shares are therefore the less volatile of the two stocks.Insider Activity and Investor Sentiment
Comparing the number of shares sold short to the float is a method analysts often use to get a reading on investor sentiment. PTN has a short ratio of 5.97 compared to a short interest of 8.64 for MTZ. This implies that the market is currently less bearish on the outlook for PTN.Summary
MasTec, Inc. (NYSE:MTZ) beats Palatin Technologies, Inc. (NYSE:PTN) on a total of 10 of the 14 factors compared between the two stocks. MTZ is more profitable, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate, higher liquidity and has lower financial risk. In terms of valuation, MTZ is the cheaper of the two stocks on book value and sales basis, Finally, CHS has better sentiment signals based on short interest.