Ventas, Inc. (NYSE:VTR) shares are down more than -10.95% this year and recently decreased -3.15% or -$1.74 to settle at $53.44. DPW Holdings, Inc. (NYSE:DPW), on the other hand, is down -80.69% year to date as of 06/13/2018. It currently trades at $0.62 and has returned -4.62% during the past week.
Ventas, Inc. (NYSE:VTR) and DPW Holdings, Inc. (NYSE:DPW) are the two most active stocks in the REIT – Healthcare Facilities 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 VTR to grow earnings at a 6.90% annual rate over the next 5 years.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. Ventas, Inc. (VTR) has an EBITDA margin of 53.36%. This suggests that VTR underlying business is more profitable VTR’s ROI is 4.80% while DPW has a ROI of -26.00%. The interpretation is that VTR’s business generates a higher return on investment than DPW’s.Cash Flow
Cash is king when it comes to investing. VTR’s free cash flow (“FCF”) per share for the trailing twelve months was -0.20. Comparatively, DPW’s free cash flow per share was -0.28. On a percent-of-sales basis, VTR’s free cash flow was -1.99% while DPW converted -0.15% of its revenues into cash flow. This means that, for a given level of sales, DPW is able to generate more free cash flow for investors.Liquidity and Financial Risk
VTR’s debt-to-equity ratio is 1.02 versus a D/E of 0.35 for DPW. VTR is therefore the more solvent of the two companies, and has lower financial risk.
VTR trades at a forward P/E of 33.57, a P/B of 1.75, and a P/S of 5.24, compared to a P/B of 1.09, and a P/S of 2.55 for DPW. VTR 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 isn’t a good investment if the stock is priced accurately. To get a sense of “value” we must compare the current price to some measure of intrinsic value such as a price target. VTR is currently priced at a -1.84% to its one-year price target of 54.44. Comparatively, DPW is -97.6% relative to its price target of 25.81. This suggests that DPW is the better investment over the next year.
Risk and Volatility
Analyst use beta to measure a stock’s volatility relative to the overall market. Stocks with a beta above 1 tend to have bigger swings in price than the market as a whole, the opposite being the case for stocks with a beta below 1. VTR has a beta of 0.15 and DPW’s beta is 2.27. VTR’s shares are therefore the less volatile of the two stocks.Insider Activity and Investor Sentiment
Short interest is another tool that analysts use to gauge investor sentiment. It represents the percentage of a stock’s tradable shares that are being shorted. VTR has a short ratio of 3.08 compared to a short interest of 1.78 for DPW. This implies that the market is currently less bearish on the outlook for DPW.Summary
DPW Holdings, Inc. (NYSE:DPW) beats Ventas, Inc. (NYSE:VTR) on a total of 9 of the 14 factors compared between the two stocks. DPW is growing fastly, higher liquidity and has lower financial risk. In terms of valuation, DPW is the cheaper of the two stocks on an earnings, book value and sales basis, DPW is more undervalued relative to its price target. Finally, DPW has better sentiment signals based on short interest.