Inovalon Holdings, Inc. (NASDAQ:INOV), on the other hand, is down -6.33% year to date as of 01/10/2018. It currently trades at $14.05 and has returned -6.33% during the past week.
Rennova Health, Inc. (NASDAQ:RNVA) and Inovalon Holdings, Inc. (NASDAQ:INOV) are the two most active stocks in the Healthcare Information Services industry based on today’s trading volumes. The market is clearly enthusiastic about both these stocks, but which is the better investment? To answer this, we will compare the two companies based on the strength of their growth, profitability, risk, returns, valuation, analyst recommendations, and insider trends.
The ability to consistently grow earnings at a high compound rate is a defining characteristic of the best companies for long-term investment. Comparatively, INOV is expected to grow at a 8.00% annual rate. All else equal, INOV’s higher growth rate would imply a greater potential for capital appreciation.
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. EBITDA margin of 17.92% for Inovalon Holdings, Inc. (INOV). RNVA’s ROI is 1582.90% while INOV has a ROI of 2.70%. The interpretation is that RNVA’s business generates a higher return on investment than INOV’s.
Earnings don’t always accurately reflect the amount of cash that a company brings in. RNVA’s free cash flow (“FCF”) per share for the trailing twelve months was -2.78. Comparatively, INOV’s free cash flow per share was +0.18. On a percent-of-sales basis, RNVA’s free cash flow was -0.3% while INOV converted 0.01% of its revenues into cash flow. This means that, for a given level of sales, INOV 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. RNVA has a current ratio of 0.30 compared to 5.60 for INOV. This means that INOV can more easily cover its most immediate liabilities over the next twelve months.
RNVA trades at a P/S of 0.02, compared to a forward P/E of 39.36, a P/B of 3.04, and a P/S of 4.69 for INOV. RNVA is the cheaper 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. RNVA is currently priced at a -99.99% to its one-year price target of 555.00. Comparatively, INOV is 8.08% relative to its price target of 13.00. This suggests that RNVA is the better investment over the next year.
Rennova Health, Inc. (NASDAQ:RNVA) beats Inovalon Holdings, Inc. (NASDAQ:INOV) on a total of 9 of the 14 factors compared between the two stocks. RNVA generates a higher return on investment and has lower financial risk. In terms of valuation, RNVA is the cheaper of the two stocks on an earnings, book value and sales basis, RNVA is more undervalued relative to its price target. Finally, RNVA has better sentiment signals based on short interest.