Gannett Co., Inc. (NYSE:GCI) shares are down more than -10.70% this year and recently decreased -1.43% or -$0.15 to settle at $10.35. SEI Investments Co. (NASDAQ:SEIC), on the other hand, is down -8.81% year to date as of 06/13/2018. It currently trades at $65.53 and has returned -2.22% during the past week.
Gannett Co., Inc. (NYSE:GCI) and SEI Investments Co. (NASDAQ:SEIC) are the two most active stocks in the Publishing – Newspapers 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
One of the key things investors look for in a company is the ability to grow earnings at a high compound rate over time. Comparatively, SEIC is expected to grow at a 12.00% annual rate. All else equal, SEIC’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. , compared to an EBITDA margin of 48.25% for SEI Investments Co. (SEIC). GCI’s ROI is 5.60% while SEIC has a ROI of 15.40%. The interpretation is that SEIC’s business generates a higher return on investment than GCI’s.Cash Flow
Earnings don’t always accurately reflect the amount of cash that a company brings in. GCI’s free cash flow (“FCF”) per share for the trailing twelve months was +0.30. Comparatively, SEIC’s free cash flow per share was +0.31. On a percent-of-sales basis, GCI’s free cash flow was 1.08% while SEIC converted 3.21% of its revenues into cash flow. This means that, for a given level of sales, SEIC is able to generate more free cash flow for investors.Liquidity and Financial Risk
Liquidity and leverage ratios measure a company’s ability to meet short-term obligations and longer-term debts. GCI has a current ratio of 1.20 compared to 6.40 for SEIC. This means that SEIC can more easily cover its most immediate liabilities over the next twelve months. GCI’s debt-to-equity ratio is 0.30 versus a D/E of 0.01 for SEIC. GCI is therefore the more solvent of the two companies, and has lower financial risk.Valuation
GCI trades at a forward P/E of 10.53, a P/B of 1.15, and a P/S of 0.38, compared to a forward P/E of 19.46, a P/B of 6.39, and a P/S of 6.62 for SEIC. GCI 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
Investors often compare a stock’s current price to an analyst price target to get a sense of the potential upside within the next year. GCI is currently priced at a -11.91% to its one-year price target of 11.75. Comparatively, SEIC is -15.45% relative to its price target of 77.50. This suggests that SEIC 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. GCI has a short ratio of 10.96 compared to a short interest of 3.30 for SEIC. This implies that the market is currently less bearish on the outlook for SEIC.Summary
SEI Investments Co. (NASDAQ:SEIC) beats Gannett Co., Inc. (NYSE:GCI) on a total of 10 of the 14 factors compared between the two stocks. SEIC , is more profitable, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate, higher liquidity and has lower financial risk. In terms of valuation, GCI is the cheaper of the two stocks on an earnings, book value and sales basis, SEIC is more undervalued relative to its price target. Finally, SEIC has better sentiment signals based on short interest.