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Helios and Matheson Analytics Inc. (HMNY) vs. GameStop Corp. (GME): Which is the Better Investment?

Helios and Matheson Analytics Inc. (NASDAQ:HMNY) shares are down more than -94.15% this year and recently decreased -5.38% or -$0.02 to settle at $0.37. GameStop Corp. (NYSE:GME), on the other hand, is down -25.74% year to date as of 06/13/2018. It currently trades at $13.33 and has returned -7.56% during the past week.

Helios and Matheson Analytics Inc. (NASDAQ:HMNY) and GameStop Corp. (NYSE:GME) are the two most active stocks in the Information Technology Services 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. Comparatively, GME is expected to grow at a 15.00% annual rate. All else equal, GME’s higher growth rate would imply a greater potential for capital appreciation.

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., compared to an EBITDA margin of 2.65% for GameStop Corp. (GME). HMNY’s ROI is 171.20% while GME has a ROI of 4.40%. The interpretation is that HMNY’s business generates a higher return on investment than GME’s.

Cash Flow



The value of a stock is simply the present value of its future free cash flows. HMNY’s free cash flow (“FCF”) per share for the trailing twelve months was -1.87. Comparatively, GME’s free cash flow per share was -. On a percent-of-sales basis, HMNY’s free cash flow was -1.48% while GME converted 0% of its revenues into cash flow. This means that, for a given level of sales, GME is able to generate more free cash flow for investors.

Liquidity and Financial Risk

Liquidity and leverage ratios provide insight into the financial health of a company, and allow investors to determine the likelihood that the company will be able to continue operating as a going concern. HMNY has a current ratio of 0.40 compared to 1.30 for GME. This means that GME can more easily cover its most immediate liabilities over the next twelve months.

Valuation

HMNY trades at a P/S of 0.50, compared to a forward P/E of 4.67, a P/B of 0.61, and a P/S of 0.15 for GME. 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. HMNY is currently priced at a -96.17% to its one-year price target of 9.67. Comparatively, GME is -6.13% relative to its price target of 14.20. This suggests that HMNY is the better investment over the next year.

Risk and Volatility

Beta is a metric that investors frequently use to analyze a stock’s systematic risk. A beta above 1 implies above average market volatility. Conversely, a stock with a beta below 1 is seen as less risky than the overall market. HMNY has a beta of 1.68 and GME’s beta is 1.45. GME’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. HMNY has a short ratio of 1.55 compared to a short interest of 8.48 for GME. This implies that the market is currently less bearish on the outlook for HMNY.

Summary

GameStop Corp. (NYSE:GME) beats Helios and Matheson Analytics Inc. (NASDAQ:HMNY) on a total of 7 of the 14 factors compared between the two stocks. GME is more profitable, has higher cash flow per share, has a higher cash conversion rate, higher liquidity and has lower financial risk. Finally, ANTH has better sentiment signals based on short interest.

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