CIRCOR International, Inc. (NYSE:CIR) shares are down more than -11.59% this year and recently decreased -3.97% or -$1.78 to settle at $43.04. Aqua Metals, Inc. (NASDAQ:AQMS), on the other hand, is up 47.42% year to date as of 06/13/2018. It currently trades at $3.14 and has returned -2.79% during the past week.
CIRCOR International, Inc. (NYSE:CIR) and Aqua Metals, Inc. (NASDAQ:AQMS) are the two most active stocks in the Industrial Equipment & Components 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.Growth
The ability to grow earnings at a compound rate over time is a crucial determinant of investment value. Analysts expect CIR to grow earnings at a 6.07% annual rate over the next 5 years. Comparatively, AQMS is expected to grow at a 35.00% annual rate. All else equal, AQMS’s higher growth rate would imply a greater potential for capital appreciation.Profitability and Returns
Growth doesn’t mean much if it comes at the cost of weak profitability. To adjust for differences in capital structure we’ll use EBITDA margin and Return on Investment (ROI) as measures of profitability and return. CIRCOR International, Inc. (CIR) has an EBITDA margin of 5.18%. This suggests that CIR underlying business is more profitable CIR’s ROI is 1.90% while AQMS has a ROI of -35.70%. The interpretation is that CIR’s business generates a higher return on investment than AQMS’s.Cash Flow
The value of a stock is simply the present value of its future free cash flows. CIR’s free cash flow (“FCF”) per share for the trailing twelve months was -0.42. Comparatively, AQMS’s free cash flow per share was -0.26. On a percent-of-sales basis, CIR’s free cash flow was -0% while AQMS converted -0.36% of its revenues into cash flow. This means that, for a given level of sales, CIR 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. CIR has a current ratio of 2.00 compared to 4.70 for AQMS. This means that AQMS can more easily cover its most immediate liabilities over the next twelve months. CIR’s debt-to-equity ratio is 0.00 versus a D/E of 0.20 for AQMS. AQMS is therefore the more solvent of the two companies, and has lower financial risk.Valuation
CIR trades at a forward P/E of 14.95, a P/B of 1.44, and a P/S of 1.07, compared to a P/B of 1.63, and a P/S of 26.05 for AQMS. 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”. CIR is currently priced at a -23.14% to its one-year price target of 56.00. Comparatively, AQMS is -73.83% relative to its price target of 12.00. This suggests that AQMS 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. CIR has a short ratio of 14.18 compared to a short interest of 7.20 for AQMS. This implies that the market is currently less bearish on the outlook for AQMS.Summary
Aqua Metals, Inc. (NASDAQ:AQMS) beats CIRCOR International, Inc. (NYSE:CIR) on a total of 7 of the 14 factors compared between the two stocks. AQMS is more profitable, has higher cash flow per share and higher liquidity. AQMS is more undervalued relative to its price target. Finally, AQMS has better sentiment signals based on short interest.