Altice USA, Inc. (NYSE:ATUS) shares are down more than -4.71% this year and recently increased 3.74% or $0.73 to settle at $20.23. Golden Star Resources Ltd. (NYSE:GSS), on the other hand, is down -19.17% year to date as of 05/16/2018. It currently trades at $0.72 and has returned 0.62% during the past week.
Altice USA, Inc. (NYSE:ATUS) and Golden Star Resources Ltd. (NYSE:GSS) are the two most active stocks in the Telecom Services – Domestic industry based on today’s trading volumes. Investor interest in the two stocks is clearly very high, but which is the better investment? To answer this question, we will compare the two companies across growth, profitability, risk, and valuation metrics, and also examine their analyst ratings and insider activity trends.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 ATUS to grow earnings at a 3.00% annual rate over the next 5 years. Comparatively, GSS is expected to grow at a 10.00% annual rate. All else equal, GSS’s higher growth rate would imply a greater potential for capital appreciation.Profitability and Returns
Growth isn’t very attractive to investors if companies are sacrificing profitability and shareholder returns to achieve that growth. We will use Return on Investment (ROI), which control for differences in capital structure between the two companies, to measure profitability and return. ATUS’s ROI is 2.80% while GSS has a ROI of 34.20%. The interpretation is that GSS’s business generates a higher return on investment than ATUS’s.Cash Flow
If there’s one thing investors care more about than earnings, it’s cash flow. On a percent-of-sales basis, ATUS’s free cash flow was 0% while GSS converted -0% of its revenues into cash flow. This means that, for a given level of sales, ATUS is able to generate more free cash flow for investors.Liquidity and Financial Risk
Analysts look at liquidity and leverage ratios to assess how easily a company can cover its liabilities. ATUS has a current ratio of 0.30 compared to 0.50 for GSS. This means that GSS can more easily cover its most immediate liabilities over the next twelve months. ATUS’s debt-to-equity ratio is 3.83 versus a D/E of 15.56 for GSS. GSS is therefore the more solvent of the two companies, and has lower financial risk.Valuation
ATUS trades at a forward P/E of 70.24, a P/B of 2.61, and a P/S of 1.47, compared to a forward P/E of 3.79, a P/B of 35.97, and a P/S of 1.19 for GSS. ATUS is the cheaper of the two stocks on book value basis but is expensive in terms of P/E 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
A cheap stock isn’t a good investment if the stock is priced accurately. To get a sense of “value” we must compare the current price to some measure of intrinsic value such as a price target. ATUS is currently priced at a -25.71% to its one-year price target of 27.23. Comparatively, GSS is -33.94% relative to its price target of 1.09. This suggests that GSS is the better investment over the next year.
Insider Activity and Investor Sentiment
The analysis of insider buying and selling trends can be extended to the aggregate level. Short interest, which represents the percentage of a stock’s tradable shares currently being shorted, captures what the market as a whole feels about a stock. ATUS has a short ratio of 13.53 compared to a short interest of 9.35 for GSS. This implies that the market is currently less bearish on the outlook for GSS.Summary
Golden Star Resources Ltd. (NYSE:GSS) beats Altice USA, Inc. (NYSE:ATUS) on a total of 8 of the 14 factors compared between the two stocks. GSS has higher cash flow per share, generates a higher return on investment and higher liquidity. In terms of valuation, GSS is the cheaper of the two stocks on an earnings and sales basis, GSS is more undervalued relative to its price target. Finally, GSS has better sentiment signals based on short interest.