Global

Critical Comparison: Jumei International Holding Limited (JMEI) vs. Stellar Biotechnologies, Inc. (SBOT)

Jumei International Holding Limited (NYSE:JMEI) shares are down more than -14.38% this year and recently increased 4.17% or $0.1 to settle at $2.50. Stellar Biotechnologies, Inc. (NASDAQ:SBOT), on the other hand, is down -60.32% year to date as of 05/16/2018. It currently trades at $2.25 and has returned -60.25% during the past week.

Jumei International Holding Limited (NYSE:JMEI) and Stellar Biotechnologies, Inc. (NASDAQ:SBOT) are the two most active stocks in the Specialty Retail, Other 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 JMEI to grow earnings at a 16.70% annual rate over the next 5 years.

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 Return on Investment (ROI) as measures of profitability and return. JMEI’s ROI is -1.60% while SBOT has a ROI of -70.60%. The interpretation is that JMEI’s business generates a higher return on investment than SBOT’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, JMEI’s free cash flow was 0% while SBOT converted -4.76% of its revenues into cash flow. This means that, for a given level of sales, JMEI 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. JMEI has a current ratio of 3.30 compared to 9.80 for SBOT. This means that SBOT can more easily cover its most immediate liabilities over the next twelve months. JMEI’s debt-to-equity ratio is 0.00 versus a D/E of 0.00 for SBOT. JMEI is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

JMEI trades at a P/B of 0.61, and a P/S of 0.43, compared to a P/B of 0.56, and a P/S of 587.25 for SBOT. JMEI is the cheaper of the two stocks on sales basis but is expensive in terms of P/E and P/B 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. JMEI is currently priced at a -80% to its one-year price target of 12.50. Comparatively, SBOT is 12.5% relative to its price target of 2.00. This suggests that JMEI 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. JMEI has a beta of 1.53 and SBOT’s beta is 0.71. SBOT’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. JMEI has a short ratio of 1.83 compared to a short interest of 4.35 for SBOT. This implies that the market is currently less bearish on the outlook for JMEI.

Summary

Jumei International Holding Limited (NYSE:JMEI) beats Stellar Biotechnologies, Inc. (NASDAQ:SBOT) on a total of 7 of the 14 factors compared between the two stocks. JMEI is growing fastly, generates a higher return on investment, has higher cash flow per share and has a higher cash conversion rate. JMEI is more undervalued relative to its price target. Finally, JMEI has better sentiment signals based on short interest.

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