Global

A Side-by-side Analysis of Dave & Buster’s Entertainment, Inc. (PLAY) and Inpixon (INPX)

Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) shares are up more than 1.18% this year and recently increased 16.70% or $7.99 to settle at $55.82. Inpixon (NASDAQ:INPX), on the other hand, is down -93.46% year to date as of 06/12/2018. It currently trades at $0.41 and has returned 16.09% during the past week.

Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) and Inpixon (NASDAQ:INPX) are the two most active stocks in the Restaurants industry based on today’s trading volumes. The market is clearly enthusiastic about both these stocks, but which is the better investment? To answer this, we will compare the two companies based on the strength of their growth, profitability, risk, returns, valuation, analyst recommendations, and insider trends.

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. Analysts expect PLAY to grow earnings at a 12.00% annual rate over the next 5 years. Comparatively, INPX is expected to grow at a 20.00% annual rate. All else equal, INPX’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. Dave & Buster’s Entertainment, Inc. (PLAY) has an EBITDA margin of 22.76%. This suggests that PLAY underlying business is more profitable

Cash Flow



The value of a stock is simply the present value of its future free cash flows. PLAY’s free cash flow (“FCF”) per share for the trailing twelve months was -0.14. Comparatively, INPX’s free cash flow per share was -2.62. On a percent-of-sales basis, PLAY’s free cash flow was -0.49% while INPX converted -0.09% of its revenues into cash flow. This means that, for a given level of sales, INPX 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. PLAY has a current ratio of 0.50 compared to 0.40 for INPX. This means that PLAY can more easily cover its most immediate liabilities over the next twelve months.

Valuation

PLAY trades at a forward P/E of 18.73, a P/B of 5.37, and a P/S of 1.99, compared to a P/S of 0.20 for INPX. PLAY 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

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. PLAY is currently priced at a 2.22% to its one-year price target of 54.61.

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. PLAY has a beta of 0.44 and INPX’s beta is 3.72. PLAY’s shares are therefore the less volatile of the two stocks.

Insider Activity and Investor Sentiment




Short interest is another tool that analysts use to gauge investor sentiment. It represents the percentage of a stock’s tradable shares that are being shorted. PLAY has a short ratio of 5.65 compared to a short interest of 0.89 for INPX. This implies that the market is currently less bearish on the outlook for INPX.

Summary

Inpixon (NASDAQ:INPX) beats Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) on a total of 7 of the 13 factors compared between the two stocks. INPX is more profitable, has a higher cash conversion rate and has lower financial risk. In terms of valuation, INPX is the cheaper of the two stocks on an earnings, book value and sales basis, Finally, INPX has better sentiment signals based on short interest.

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