TETRA Technologies, Inc. (NYSE:TTI) shares are down more than -26.49% this year and recently increased 1.37% or $0.05 to settle at $3.69. Bristow Group Inc. (NYSE:BRS), on the other hand, is down -28.56% year to date as of 11/13/2017. It currently trades at $14.63 and has returned 62.20% during the past week.
TETRA Technologies, Inc. (NYSE:TTI) and Bristow Group Inc. (NYSE:BRS) are the two most active stocks in the Oil & Gas Equipment & 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.
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. TETRA Technologies, Inc. (TTI) has an EBITDA margin of 17.56%. This suggests that TTI underlying business is more profitable TTI’s ROI is -18.50% while BRS has a ROI of -4.80%. The interpretation is that BRS’s business generates a higher return on investment than TTI’s.
The amount of free cash flow available to investors is ultimately what determines the value of a stock. TTI’s free cash flow (“FCF”) per share for the trailing twelve months was +0.19. Comparatively, BRS’s free cash flow per share was +0.12. On a percent-of-sales basis, TTI’s free cash flow was 0% while BRS converted 0.3% of its revenues into cash flow. This means that, for a given level of sales, BRS is able to generate more free cash flow for investors.
Liquidity and Financial Risk
Analysts look at liquidity and leverage ratios to assess how easily a company can cover its liabilities. TTI has a current ratio of 2.20 compared to 1.30 for BRS. This means that TTI can more easily cover its most immediate liabilities over the next twelve months. TTI’s debt-to-equity ratio is 0.00 versus a D/E of 1.07 for BRS. BRS is therefore the more solvent of the two companies, and has lower financial risk.
TTI trades at a P/B of 1.79, and a P/S of 0.55, compared to a P/B of 0.42, and a P/S of 0.37 for BRS. 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”. TTI is currently priced at a -18% to its one-year price target of 4.50. Comparatively, BRS is 30.63% relative to its price target of 11.20. This suggests that TTI is the better investment over the next year.
The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 2.10 for TTI and 2.80 for BRS, which implies that analysts are more bullish on the outlook for BRS.
Risk and Volatility
Beta is an important measure that gives investors a sense of the market risk associated with a particular stock. A beta above 1 signals above average market risk, while a beta below 1 implies below average volatility. TTI has a beta of 0.77 and BRS’s beta is 2.84. TTI’s shares are therefore the less volatile of the two stocks.
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. TTI has a short ratio of 5.20 compared to a short interest of 14.70 for BRS. This implies that the market is currently less bearish on the outlook for TTI.
TETRA Technologies, Inc. (NYSE:TTI) beats Bristow Group Inc. (NYSE:BRS) on a total of 8 of the 14 factors compared between the two stocks. TTI is more profitable, has higher cash flow per share, higher liquidity and has lower financial risk. TTI is more undervalued relative to its price target. Finally, TTI has better sentiment signals based on short interest.