NII Holdings, Inc. (NASDAQ:NIHD) shares are up more than 588.19% this year and recently increased 22.69% or $0.54 to settle at $2.92. Lands’ End, Inc. (NASDAQ:LE), on the other hand, is up 52.94% year to date as of 06/12/2018. It currently trades at $29.90 and has returned 35.29% during the past week.
NII Holdings, Inc. (NASDAQ:NIHD) and Lands’ End, Inc. (NASDAQ:LE) are the two most active stocks in the Wireless Communications 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
The ability to consistently grow earnings at a high compound rate is a defining characteristic of the best companies for long-term investment. Comparatively, LE is expected to grow at a 20.00% annual rate. All else equal, LE’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. EBITDA margin of 3.78% for Lands’ End, Inc. (LE). NIHD’s ROI is -43.30% while LE has a ROI of 3.40%. The interpretation is that LE’s business generates a higher return on investment than NIHD’s.Cash Flow
The amount of free cash flow available to investors is ultimately what determines the value of a stock. NIHD’s free cash flow (“FCF”) per share for the trailing twelve months was -0.56. Comparatively, LE’s free cash flow per share was +3.33. On a percent-of-sales basis, NIHD’s free cash flow was -0.01% while LE converted 7.6% of its revenues into cash flow. This means that, for a given level of sales, LE 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. NIHD has a current ratio of 1.50 compared to 2.40 for LE. This means that LE can more easily cover its most immediate liabilities over the next twelve months.Valuation
NIHD trades at a P/S of 0.37, compared to a forward P/E of 56.95, a P/B of 3.12, and a P/S of 0.67 for LE. NIHD is the cheaper 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
A cheap stock is not necessarily a value stock. Most of the time, a stock is cheap for good reason. A stock only has value if the current price is substantially below the price at which it should trade in the future. NIHD is currently priced at a 133.6% to its one-year price target of 1.25. Comparatively, LE is 49.5% relative to its price target of 20.00. This suggests that LE is the better investment over the next year.
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. NIHD has a short ratio of 3.24 compared to a short interest of 8.73 for LE. This implies that the market is currently less bearish on the outlook for NIHD.Summary
Lands’ End, Inc. (NASDAQ:LE) beats NII Holdings, Inc. (NASDAQ:NIHD) on a total of 9 of the 14 factors compared between the two stocks. LE has lower financial risk, is more profitable, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate and higher liquidity. In terms of valuation, NIHD is the cheaper of the two stocks on an earnings, book value and sales basis, LE is more undervalued relative to its price target. Finally, HEAR has better sentiment signals based on short interest.