Symantec Corporation (NASDAQ:SYMC) shares are up more than 17.12% this year and recently increased 1.52% or $0.42 to settle at $27.98. Vicon Industries, Inc. (NYSE:VII), on the other hand, is down -7.83% year to date as of 12/08/2017. It currently trades at $0.54 and has returned 28.60% during the past week.
Symantec Corporation (NASDAQ:SYMC) and Vicon Industries, Inc. (NYSE:VII) are the two most active stocks in the Security Software & Services 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.
The ability to consistently grow earnings at a high compound rate is a defining characteristic of the best companies for long-term investment. Analysts expect SYMC to grow earnings at a 7.20% annual rate over the next 5 years.
Profitability and Returns
A high growth rate isn’t necessarily valuable to investors. In fact, companies that overinvest in low return projects just to achieve a high growth rate can actually destroy shareholder value. Profitability and returns are a measure of the quality of a company’s business and its growth opportunities. We’ll use EBITDA margin and Return on Investment (ROI) to measure this. Symantec Corporation (SYMC) has an EBITDA margin of 4.07%. This suggests that SYMC underlying business is more profitable SYMC’s ROI is -0.60% while VII has a ROI of -131.00%. The interpretation is that SYMC’s business generates a higher return on investment than VII’s.
If there’s one thing investors care more about than earnings, it’s cash flow. SYMC’s free cash flow (“FCF”) per share for the trailing twelve months was +0.17. Comparatively, VII’s free cash flow per share was -0.10. On a percent-of-sales basis, SYMC’s free cash flow was 2.62% while VII converted -0% of its revenues into cash flow. This means that, for a given level of sales, SYMC 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. SYMC has a current ratio of 1.10 compared to 2.20 for VII. This means that VII can more easily cover its most immediate liabilities over the next twelve months. SYMC’s debt-to-equity ratio is 1.76 versus a D/E of 0.50 for VII. SYMC is therefore the more solvent of the two companies, and has lower financial risk.
SYMC trades at a forward P/E of 14.71, a P/B of 4.87, and a P/S of 3.77, compared to a P/B of 0.90, and a P/S of 0.21 for VII. SYMC is the expensive of the two stocks on an earnings, book value and sales basis. 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. SYMC is currently priced at a -13.64% to its one-year price target of 32.40. Risk and Volatility
Analyst use beta to measure a stock’s volatility relative to the overall market. Stocks with a beta above 1 tend to have bigger swings in price than the market as a whole, the opposite being the case for stocks with a beta below 1. SYMC has a beta of 1.13 and VII’s beta is 0.50. VII’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. SYMC has a short ratio of 4.13 compared to a short interest of 0.23 for VII. This implies that the market is currently less bearish on the outlook for VII.
Vicon Industries, Inc. (NYSE:VII) beats Symantec Corporation (NASDAQ:SYMC) on a total of 8 of the 13 factors compared between the two stocks. VII is growing fastly and has lower financial risk. In terms of valuation, VII is the cheaper of the two stocks on an earnings, book value and sales basis, Finally, VII has better sentiment signals based on short interest.