Earnings

Comparing Valuation And Performance: Casa Systems, Inc. (CASA), Paycom Software, Inc. (PAYC)

The shares of Casa Systems, Inc. have increased by more than 7.15% this year alone. The shares recently went up by 3.59% or $0.66 and now trades at $19.03. The shares of Paycom Software, Inc. (NYSE:PAYC), has jumped by 37.50% year to date as of 06/12/2018. The shares currently trade at $110.45 and have been able to report a change of 0.54% over the past one week.

The stock of Casa Systems, Inc. and Paycom Software, Inc. were two of the most active stocks on Tuesday. Investors seem to be very interested in what happens to the stocks of these two companies but do investors favor one over the other? We will analyze the growth, profitability, risk, valuation, and insider trends of both companies and see which one investors prefer.

Profitability and Returns

Growth alone cannot be used to see if the company will be valuable. Shareholders will be the losers if a company invest in ventures that aren’t profitable enough to support upbeat growth. In order for us to accurately measure profitability and return, we will be using the EBITDA margin and Return on Investment (ROI), which balances the difference in capital structure. CASA has an EBITDA margin of 29.8%, this implies that the underlying business of CASA is more profitable. The ROI of CASA is 33.30% while that of PAYC is 21.60%. These figures suggest that CASA ventures generate a higher ROI than that of PAYC.

Cash Flow

The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, CASA’s free cash flow per share is a positive 0.01, while that of PAYC is positive 0.01.

Liquidity and Financial Risk



The ability of a company to meet up with its short-term obligations and be able to clear its longer-term debts is measured using Liquidity and leverage ratios. The current ratio for CASA is 5.30 and that of PAYC is 1.10. This implies that it is easier for CASA to cover its immediate obligations over the next 12 months than PAYC. The debt ratio of CASA is 4.14 compared to 0.11 for PAYC. CASA can be able to settle its long-term debts and thus is a lower financial risk than PAYC.

Valuation

CASA currently trades at a forward P/E of 13.76, a P/B of 21.87, and a P/S of 4.38 while PAYC trades at a forward P/E of 36.04, a P/B of 19.18, and a P/S of 14.48. This means that looking at the earnings, book values and sales basis, CASA is the cheaper one. It is very obvious that earnings are the most important factors to investors, thus analysts are most likely to place their bet on the P/E.

Analyst Price Targets and Opinions

The mistake some people make is that they think a cheap stock has more value to it. In order to know the value of a stock, there is need to compare its current price to its likely trading price in the future. The price of CASA is currently at a -42.33% to its one-year price target of 33.00. Looking at its rival pricing, PAYC is at a -3.17% relative to its price target of 114.06.

Insider Activity and Investor Sentiment




Short interest or otherwise called the percentage of a stock’s tradable shares currently being shorted is another data that investors use to get a handle on sentiment. The short ratio for CASA is 1.11 while that of PAYC is just 9.12. This means that analysts are more bullish on the forecast for CASA stock.

Conclusion

The stock of Paycom Software, Inc. defeats that of Casa Systems, Inc. when the two are compared, with PAYC taking 4 out of the total factors that were been considered. PAYC happens to be more profitable, generates a higher ROI, has higher cash flow per share, higher liquidity and has a lower financial risk. When looking at the stock valuation, PAYC is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for PAYC is better on when it is viewed on short interest.

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