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Critical Comparison: The J. M. Smucker Company (SJM) vs. PAVmed Inc. (PAVM)

The J. M. Smucker Company (NYSE:SJM) shares are down more than -16.43% this year and recently decreased -1.95% or -$2.07 to settle at $103.83. PAVmed Inc. (NASDAQ:PAVM), on the other hand, is down -56.24% year to date as of 06/13/2018. It currently trades at $1.00 and has returned 3.35% during the past week.

The J. M. Smucker Company (NYSE:SJM) and PAVmed Inc. (NASDAQ:PAVM) are the two most active stocks in the Processed & Packaged Goods industry based on today’s trading volumes. To determine if one is a better investment than the other, we will compare the two companies’ growth, profitability, risk, return, and valuation characteristics, as well as their analyst ratings and sentiment signals.

Growth

The ability to grow earnings at a compound rate over time is a crucial determinant of investment value. Analysts expect SJM to grow earnings at a 6.20% annual rate over the next 5 years.

Profitability and Returns

Growth isn’t very attractive to investors if companies are sacrificing profitability and shareholder returns to achieve that growth. We will use EBITDA margin and Return on Investment (ROI), which control for differences in capital structure between the two companies, to measure profitability and return. The J. M. Smucker Company (SJM) has an EBITDA margin of 18.23%. This suggests that SJM underlying business is more profitable

Cash Flow



Cash is king when it comes to investing. SJM’s free cash flow (“FCF”) per share for the trailing twelve months was +1.00. Comparatively, PAVM’s free cash flow per share was -0.13.

Liquidity and Financial Risk

Liquidity and leverage ratios measure a company’s ability to meet short-term obligations and longer-term debts. SJM has a current ratio of 1.50 compared to 3.00 for PAVM. This means that PAVM can more easily cover its most immediate liabilities over the next twelve months.

Valuation

SJM trades at a forward P/E of 11.66, a P/B of 1.50, and a P/S of 1.67, compared to for PAVM. SJM 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

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. SJM is currently priced at a -14.79% to its one-year price target of 121.85. Comparatively, PAVM is -77.78% relative to its price target of 4.50. This suggests that PAVM is the better investment over the next year.

Insider Activity and Investor Sentiment

Comparing the number of shares sold short to the float is a method analysts often use to get a reading on investor sentiment. SJM has a short ratio of 8.11 compared to a short interest of 0.18 for PAVM. This implies that the market is currently less bearish on the outlook for PAVM.

Summary




PAVmed Inc. (NASDAQ:PAVM) beats The J. M. Smucker Company (NYSE:SJM) on a total of 9 of the 13 factors compared between the two stocks. PAVM is growing fastly and has lower financial risk. In terms of valuation, PAVM is the cheaper of the two stocks on an earnings, book value and sales basis, PAVM is more undervalued relative to its price target. Finally, PAVM has better sentiment signals based on short interest.

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