Intrepid Potash, Inc. (NYSE:IPI) shares are up more than 6.09% this year and recently increased 8.60% or $0.4 to settle at $5.05. Sears Holdings Corporation (NASDAQ:SHLD), on the other hand, is up 6.15% year to date as of 05/16/2018. It currently trades at $3.80 and has returned 18.75% during the past week.
Intrepid Potash, Inc. (NYSE:IPI) and Sears Holdings Corporation (NASDAQ:SHLD) are the two most active stocks in the Agricultural Chemicals 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.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 EBITDA margin and Return on Investment (ROI), which control for differences in capital structure between the two companies, to measure profitability and return., compared to an EBITDA margin of 0.08% for Sears Holdings Corporation (SHLD). IPI’s ROI is -2.50% while SHLD has a ROI of -73.80%. The interpretation is that IPI’s business generates a higher return on investment than SHLD’s.Cash Flow
If there’s one thing investors care more about than earnings, it’s cash flow. IPI’s free cash flow (“FCF”) per share for the trailing twelve months was +0.06. Comparatively, SHLD’s free cash flow per share was +0.35. On a percent-of-sales basis, IPI’s free cash flow was 0% while SHLD converted 0.23% of its revenues into cash flow. This means that, for a given level of sales, SHLD 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. IPI has a current ratio of 3.30 compared to 0.80 for SHLD. This means that IPI can more easily cover its most immediate liabilities over the next twelve months.Valuation
IPI trades at a forward P/E of 37.13, a P/B of 1.59, and a P/S of 3.92, compared to a P/S of 0.02 for SHLD. IPI 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”. IPI is currently priced at a 27.53% to its one-year price target of 3.96. Comparatively, SHLD is 90% relative to its price target of 2.00. This suggests that IPI 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. IPI has a beta of 0.79 and SHLD’s beta is 0.71. SHLD’s shares are therefore the less volatile of the two stocks.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. IPI has a short ratio of 4.99 compared to a short interest of 6.87 for SHLD. This implies that the market is currently less bearish on the outlook for IPI.Summary
Sears Holdings Corporation (NASDAQ:SHLD) beats Intrepid Potash, Inc. (NYSE:IPI) on a total of 7 of the 14 factors compared between the two stocks. SHLD is more profitable, has a higher cash conversion rate and has lower financial risk. In terms of valuation, SHLD is the cheaper of the two stocks on an earnings, book value and sales basis, Finally, NSPR has better sentiment signals based on short interest.