The Meet Group, Inc. (NASDAQ:MEET) shares are up more than 47.87% this year and recently increased 4.77% or $0.19 to settle at $4.17. Exact Sciences Corporation (NASDAQ:EXAS), on the other hand, is up 26.99% year to date as of 06/12/2018. It currently trades at $66.72 and has returned 6.82% during the past week.
The Meet Group, Inc. (NASDAQ:MEET) and Exact Sciences Corporation (NASDAQ:EXAS) are the two most active stocks in the Internet Information Providers 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
Companies that can consistently grow earnings at a high compound rate usually have the greatest potential to create value for shareholders in the long-run. Analysts expect MEET to grow earnings at a 20.00% annual rate over the next 5 years. Comparatively, EXAS is expected to grow at a 20.00% annual rate. All else equal, All else equal, the two stocks’ identical expected growth rates would imply a similar potential for capital appreciation..Profitability and Returns
Just, if not more, important than the growth rate is the quality of that growth. Growth can actual be harmful to investors if it comes at the cost of weak profitability and low returns. To adjust for differences in capital structure we’ll use Return on Investment (ROI) as measures of profitability and return. MEET’s ROI is -23.10% while EXAS has a ROI of -46.30%. The interpretation is that MEET’s business generates a higher return on investment than EXAS’s.Cash Flow
The value of a stock is simply the present value of its future free cash flows. MEET’s free cash flow (“FCF”) per share for the trailing twelve months was +0.10. Comparatively, EXAS’s free cash flow per share was -0.44. On a percent-of-sales basis, MEET’s free cash flow was 0.01% while EXAS converted -0.02% of its revenues into cash flow. This means that, for a given level of sales, MEET 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. MEET has a current ratio of 1.10 compared to 15.30 for EXAS. This means that EXAS can more easily cover its most immediate liabilities over the next twelve months. MEET’s debt-to-equity ratio is 0.28 versus a D/E of 0.71 for EXAS. EXAS is therefore the more solvent of the two companies, and has lower financial risk.Valuation
MEET trades at a forward P/E of 13.11, a P/B of 1.64, and a P/S of 2.15, compared to a P/B of 11.75, and a P/S of 27.29 for EXAS. 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. MEET is currently priced at a 19.14% to its one-year price target of 3.50. Comparatively, EXAS is 6.58% relative to its price target of 62.60. This suggests that EXAS is the better investment over the next year.
Risk and Volatility
Beta is a metric that investors frequently use to analyze a stock’s systematic risk. A beta above 1 implies above average market volatility. Conversely, a stock with a beta below 1 is seen as less risky than the overall market. MEET has a beta of 1.62 and EXAS’s beta is 0.97. EXAS’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. MEET has a short ratio of 5.72 compared to a short interest of 6.88 for EXAS. This implies that the market is currently less bearish on the outlook for MEET.Summary
The Meet Group, Inc. (NASDAQ:MEET) beats Exact Sciences Corporation (NASDAQ:EXAS) on a total of 7 of the 14 factors compared between the two stocks. MEET generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate and has lower financial risk. In terms of valuation, MEET is the cheaper of the two stocks on book value and sales basis, Finally, MEET has better sentiment signals based on short interest.