GoPro, Inc. (NASDAQ:GPRO) shares are down more than -14.93% this year and recently decreased -1.98% or -$0.13 to settle at $6.44. Hi-Crush Partners LP (NYSE:HCLP), on the other hand, is up 14.95% year to date as of 06/13/2018. It currently trades at $12.30 and has returned -4.65% during the past week.
GoPro, Inc. (NASDAQ:GPRO) and Hi-Crush Partners LP (NYSE:HCLP) are the two most active stocks in the Photographic Equipment & Supplies 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
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, HCLP is expected to grow at a -1.42% annual rate. All else equal, GPRO’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. EBITDA margin of 20.96% for Hi-Crush Partners LP (HCLP). GPRO’s ROI is -22.20% while HCLP has a ROI of 9.40%. The interpretation is that HCLP’s business generates a higher return on investment than GPRO’s.Cash Flow
If there’s one thing investors care more about than earnings, it’s cash flow. GPRO’s free cash flow (“FCF”) per share for the trailing twelve months was -0.75. Comparatively, HCLP’s free cash flow per share was +0.42. On a percent-of-sales basis, GPRO’s free cash flow was -9.41% while HCLP converted 0.01% of its revenues into cash flow. This means that, for a given level of sales, HCLP 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. GPRO has a current ratio of 1.60 compared to 1.90 for HCLP. This means that HCLP can more easily cover its most immediate liabilities over the next twelve months. GPRO’s debt-to-equity ratio is 0.61 versus a D/E of 0.24 for HCLP. GPRO is therefore the more solvent of the two companies, and has lower financial risk.Valuation
GPRO trades at a forward P/E of 920.00, a P/B of 4.10, and a P/S of 0.83, compared to a forward P/E of 4.74, a P/B of 1.35, and a P/S of 1.52 for HCLP. GPRO is the cheaper of the two stocks on sales basis but is expensive in terms of P/E and P/B ratio. 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. GPRO is currently priced at a 14.39% to its one-year price target of 5.63. Comparatively, HCLP is -27.69% relative to its price target of 17.01. This suggests that HCLP is the better investment over the next year.
Risk and Volatility
To gauge the market risk of a particular stock, investors use beta. Stocks with a beta above 1 are more volatile than the market as a whole. Conversely, a beta below 1 implies below average systematic risk. GPRO has a beta of 0.30 and HCLP’s beta is 1.16. GPRO’s shares are therefore the less volatile of the two stocks.Insider Activity and Investor Sentiment
The analysis of insider buying and selling trends can be extended to the aggregate level. Short interest, which represents the percentage of a stock’s tradable shares currently being shorted, captures what the market as a whole feels about a stock. GPRO has a short ratio of 7.07 compared to a short interest of 3.88 for HCLP. This implies that the market is currently less bearish on the outlook for HCLP.Summary
Hi-Crush Partners LP (NYSE:HCLP) beats GoPro, Inc. (NASDAQ:GPRO) on a total of 11 of the 14 factors compared between the two stocks. HCLP is growing fastly, 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, HCLP is the cheaper of the two stocks on an earnings and book value, HCLP is more undervalued relative to its price target. Finally, HCLP has better sentiment signals based on short interest.