Xcel Energy Inc. (NASDAQ:XEL) shares are down more than -11.66% this year and recently decreased -0.19% or -$0.08 to settle at $42.50. Qorvo, Inc. (NASDAQ:QRVO), on the other hand, is up 20.72% year to date as of 06/13/2018. It currently trades at $80.40 and has returned 0.39% during the past week.
Xcel Energy Inc. (NASDAQ:XEL) and Qorvo, Inc. (NASDAQ:QRVO) are the two most active stocks in the Electric Utilities industry based on today’s trading volumes. We will compare the two companies based on the strength of various metrics, including growth, profitability, risk, return, and valuation to determine if one is a better investment than the other.Growth
Companies that can increase earnings at a high compound rate over time are attractive to investors. Analysts expect XEL to grow earnings at a 5.89% annual rate over the next 5 years. Comparatively, QRVO is expected to grow at a 14.87% annual rate. All else equal, QRVO’s higher growth rate would imply a greater potential for capital appreciation.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. , compared to an EBITDA margin of 26.66% for Qorvo, Inc. (QRVO). XEL’s ROI is 6.10% while QRVO has a ROI of 1.60%. The interpretation is that XEL’s business generates a higher return on investment than QRVO’s.Cash Flow
Earnings don’t always accurately reflect the amount of cash that a company brings in. XEL’s free cash flow (“FCF”) per share for the trailing twelve months was -0.34. Comparatively, QRVO’s free cash flow per share was +1.80. On a percent-of-sales basis, XEL’s free cash flow was -1.52% while QRVO converted 7.66% of its revenues into cash flow. This means that, for a given level of sales, QRVO is able to generate more free cash flow for investors.Liquidity and Financial Risk
Liquidity and leverage ratios are important because they reveal the financial health of a company. XEL has a current ratio of 0.70 compared to 4.20 for QRVO. This means that QRVO can more easily cover its most immediate liabilities over the next twelve months. XEL’s debt-to-equity ratio is 1.38 versus a D/E of 0.21 for QRVO. XEL is therefore the more solvent of the two companies, and has lower financial risk.Valuation
XEL trades at a forward P/E of 16.40, a P/B of 1.87, and a P/S of 1.90, compared to a forward P/E of 11.82, a P/B of 2.13, and a P/S of 3.42 for QRVO. 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. XEL is currently priced at a -11.31% to its one-year price target of 47.92. Comparatively, QRVO is -1.43% relative to its price target of 81.57. This suggests that XEL is the better investment over the next year.
Risk and Volatility
No discussion on value is complete without taking into account risk. Analysts use a stock’s beta, which measures the volatility of a stock compared to the overall market, to measure systematic risk. A stock with a beta above 1 is more volatile than the market. Conversely, a beta below 1 implies a below average level of risk. XEL has a beta of 0.12 and QRVO’s beta is 0.88. XEL’s shares are therefore the less volatile of the two stocks.Insider Activity and Investor Sentiment
Comparing the number of shares sold short to the float is a method analysts often use to get a reading on investor sentiment. XEL has a short ratio of 3.42 compared to a short interest of 4.68 for QRVO. This implies that the market is currently less bearish on the outlook for XEL.Summary
Xcel Energy Inc. (NASDAQ:XEL) beats Qorvo, Inc. (NASDAQ:QRVO) on a total of 8 of the 14 factors compared between the two stocks. XEL is more profitable and generates a higher return on investment. In terms of valuation, XEL is the cheaper of the two stocks on book value and sales basis, XEL is more undervalued relative to its price target. Finally, XEL has better sentiment signals based on short interest.