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Senseonics Holdings, Inc. (SENS) vs. Pitney Bowes Inc. (PBI): Breaking Down the Medical Appliances & Equipment Industry’s Two Hottest Stocks

Senseonics Holdings, Inc. (NYSE:SENS) shares are up more than 48.12% this year and recently decreased -1.25% or -$0.05 to settle at $3.94. Pitney Bowes Inc. (NYSE:PBI), on the other hand, is down -15.21% year to date as of 06/13/2018. It currently trades at $9.48 and has returned 1.83% during the past week.

Senseonics Holdings, Inc. (NYSE:SENS) and Pitney Bowes Inc. (NYSE:PBI) are the two most active stocks in the Medical Appliances & Equipment 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

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, PBI is expected to grow at a 4.00% annual rate. All else equal, PBI’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 15.34% for Pitney Bowes Inc. (PBI). SENS’s ROI is -177.60% while PBI has a ROI of 8.30%. The interpretation is that PBI’s business generates a higher return on investment than SENS’s.

Cash Flow



Earnings don’t always accurately reflect the amount of cash that a company brings in. SENS’s free cash flow (“FCF”) per share for the trailing twelve months was -0.15. Comparatively, PBI’s free cash flow per share was +0.03. On a percent-of-sales basis, SENS’s free cash flow was -0.32% while PBI converted 0.16% of its revenues into cash flow. This means that, for a given level of sales, PBI 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. SENS has a current ratio of 3.60 compared to 1.10 for PBI. This means that SENS can more easily cover its most immediate liabilities over the next twelve months.

Valuation

SENS trades at a P/S of 58.82, compared to a forward P/E of 7.48, a P/B of 8.24, and a P/S of 0.48 for PBI. 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

When investing it’s crucial to distinguish between price and value. As Warren Buffet said, “price is what you pay, value is what you get”. SENS is currently priced at a -24.23% to its one-year price target of 5.20. Comparatively, PBI is -24.76% relative to its price target of 12.60. This suggests that PBI is the better investment over the next year.

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. SENS has a short ratio of 5.19 compared to a short interest of 3.22 for PBI. This implies that the market is currently less bearish on the outlook for PBI.

Summary




Pitney Bowes Inc. (NYSE:PBI) beats Senseonics Holdings, Inc. (NYSE:SENS) on a total of 8 of the 14 factors compared between the two stocks. PBI higher liquidity, is more profitable, generates a higher return on investment, has higher cash flow per share and has a higher cash conversion rate. PBI is more undervalued relative to its price target. Finally, PBI has better sentiment signals based on short interest.

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