MoSys, Inc. (NASDAQ:MOSY) shares are down more than -44.37% this year and recently decreased -1.54% or -$0.02 to settle at $1.28. QuickLogic Corporation (NASDAQ:QUIK), on the other hand, is up 17.27% year to date as of 11/20/2017. It currently trades at $1.63 and has returned 0.00% during the past week.
MoSys, Inc. (NASDAQ:MOSY) and QuickLogic Corporation (NASDAQ:QUIK) are the two most active stocks in the Semiconductor – Integrated Circuits industry based on today’s trading volumes. Investor interest in the two stocks is clearly very high, but which is the better investment? To answer this question, we will compare the two companies across growth, profitability, risk, and valuation metrics, and also examine their analyst ratings and insider activity trends.
The ability to grow earnings at a compound rate over time is a crucial determinant of investment value. Analysts expect MOSY to grow earnings at a 30.00% annual rate over the next 5 years. Comparatively, QUIK is expected to grow at a 20.00% annual rate. All else equal, MOSY’s higher growth rate would imply a greater potential for capital appreciation.
Profitability and Returns
Just, if not more, important than the growth rate is the quality of that growth. Growth can actual be harmful to investors if it comes at the cost of weak profitability and low returns. To adjust for differences in capital structure we’ll use Return on Investment (ROI) as measures of profitability and return. MOSY’s ROI is -133.10% while QUIK has a ROI of -103.70%. The interpretation is that QUIK’s business generates a higher return on investment than MOSY’s.
Earnings don’t always accurately reflect the amount of cash that a company brings in. MOSY’s free cash flow (“FCF”) per share for the trailing twelve months was -0.42. Comparatively, QUIK’s free cash flow per share was -0.04. On a percent-of-sales basis, MOSY’s free cash flow was -0.06% while QUIK converted -0.03% of its revenues into cash flow. This means that, for a given level of sales, QUIK is able to generate more free cash flow for investors.
Liquidity and Financial Risk
Balance sheet risk is one of the biggest factors to consider before investing. MOSY has a current ratio of 0.50 compared to 2.60 for QUIK. This means that QUIK can more easily cover its most immediate liabilities over the next twelve months. MOSY’s debt-to-equity ratio is 1.18 versus a D/E of 0.35 for QUIK. MOSY is therefore the more solvent of the two companies, and has lower financial risk.
MOSY trades at a P/B of 1.32, and a P/S of 1.51, compared to a P/B of 7.41, and a P/S of 10.79 for QUIK. 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
Just because a stock is cheaper doesn’t mean there’s more value to be had. In order to assess value we need to compare the current price to where it’s likely to trade in the future. MOSY is currently priced at a -36% to its one-year price target of 2.00. Comparatively, QUIK is -30.04% relative to its price target of 2.33. This suggests that MOSY 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 3.00 for MOSY and 2.00 for QUIK, which implies that analysts are more bullish on the outlook for MOSY.
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. MOSY has a beta of 0.22 and QUIK’s beta is -0.11. QUIK’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. MOSY has a short ratio of 0.52 compared to a short interest of 34.80 for QUIK. This implies that the market is currently less bearish on the outlook for MOSY.
QuickLogic Corporation (NASDAQ:QUIK) beats MoSys, Inc. (NASDAQ:MOSY) on a total of 7 of the 14 factors compared between the two stocks. QUIK is growing fastly, has higher cash flow per share, has a higher cash conversion rate, higher liquidity and has lower financial risk. Finally, SIGM has better sentiment signals based on short interest.