TechnipFMC plc (NYSE:FTI) shares are down more than -11.23% this year and recently increased 0.74% or $0.23 to settle at $31.38. SAExploration Holdings, Inc. (NASDAQ:SAEX), on the other hand, is down -64.66% year to date as of 12/26/2017. It currently trades at $2.58 and has returned 67.53% during the past week.
TechnipFMC plc (NYSE:FTI) and SAExploration Holdings, Inc. (NASDAQ:SAEX) are the two most active stocks in the Oil & Gas Equipment & Services industry based on today’s trading volumes. Investors are clearly interested in the two names, but is one a better choice than the other? We will compare the two companies across growth, profitability, risk, valuation, and insider trends to answer this question.
The ability to grow earnings at a compound rate over time is a crucial determinant of investment value. Analysts expect FTI to grow earnings at a -5.30% annual rate over the next 5 years.
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., compared to an EBITDA margin of 16.68% for SAExploration Holdings, Inc. (SAEX).
If there’s one thing investors care more about than earnings, it’s cash flow. On a percent-of-sales basis, FTI’s free cash flow was 0% while SAEX converted -0.01% of its revenues into cash flow. This means that, for a given level of sales, FTI 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. FTI has a current ratio of 1.20 compared to 1.30 for SAEX. This means that SAEX can more easily cover its most immediate liabilities over the next twelve months. FTI’s debt-to-equity ratio is 0.27 versus a D/E of 11.32 for SAEX. SAEX is therefore the more solvent of the two companies, and has lower financial risk.
FTI trades at a forward P/E of 24.53, a P/B of 1.07, and a P/S of 1.04, compared to a P/B of 2.26, and a P/S of 0.16 for SAEX. FTI is the cheaper of the two stocks on book value basis but is expensive in terms of P/E and P/S ratio. 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 is not necessarily a value stock. Most of the time, a stock is cheap for good reason. A stock only has value if the current price is substantially below the price at which it should trade in the future. FTI is currently priced at a -12.61% to its one-year price target of 35.91. Comparatively, SAEX is -99.56% relative to its price target of 580.50. This suggests that SAEX 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. FTI has a short ratio of 3.31 compared to a short interest of 2.77 for SAEX. This implies that the market is currently less bearish on the outlook for SAEX.
SAExploration Holdings, Inc. (NASDAQ:SAEX) beats TechnipFMC plc (NYSE:FTI) on a total of 8 of the 14 factors compared between the two stocks. SAEX generates a higher return on investment, is more profitable and higher liquidity. In terms of valuation, SAEX is the cheaper of the two stocks on an earnings and sales basis, SAEX is more undervalued relative to its price target. Finally, SAEX has better sentiment signals based on short interest.