The shares of New Gold Inc. have decreased by more than -13.68% this year alone. The shares recently went up by 7.58% or $0.2 and now trades at $2.84. The shares of Sunrun Inc. (NASDAQ:RUN), has jumped by 8.81% year to date as of 02/14/2018. The shares currently trade at $6.42 and have been able to report a change of 15.88% over the past one week.
The stock of New Gold Inc. and Sunrun Inc. were two of the most active stocks on Wednesday. Investors seem to be very interested in what happens to the stocks of these two companies but do investors favor one over the other? We will analyze the growth, profitability, risk, valuation, and insider trends of both companies and see which one investors prefer.
Profitability and Returns
Growth alone cannot be used to see if the company will be valuable. Shareholders will be the losers if a company invest in ventures that aren’t profitable enough to support upbeat growth. In order for us to accurately measure profitability and return, we will be using the EBITDA margin and Return on Investment (ROI), which balances the difference in capital structure. The ROI of NGD is 0.50% while that of RUN is -14.40%. These figures suggest that NGD ventures generate a higher ROI than that of RUN.
The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, NGD’s free cash flow per share is a negative -0.01, while that of RUN is also a negative -0.05.
Liquidity and Financial Risk
The ability of a company to meet up with its short-term obligations and be able to clear its longer-term debts is measured using Liquidity and leverage ratios. The current ratio for NGD is 2.30 and that of RUN is 0.70. This implies that it is easier for NGD to cover its immediate obligations over the next 12 months than RUN. The debt ratio of NGD is 0.42 compared to 1.69 for RUN. RUN can be able to settle its long-term debts and thus is a lower financial risk than NGD.
NGD currently trades at a forward P/E of 25.13, a P/B of 0.70, and a P/S of 3.06 while RUN trades at a forward P/E of 4.11, a P/B of 0.90, and a P/S of 1.35. This means that looking at the earnings, book values and sales basis, NGD is the cheaper one. It is very obvious that earnings are the most important factors to investors, thus analysts are most likely to place their bet on the P/E.
Analyst Price Targets and Opinions
The mistake some people make is that they think a cheap stock has more value to it. In order to know the value of a stock, there is need to compare its current price to its likely trading price in the future. The price of NGD is currently at a -29.18% to its one-year price target of 4.01. Looking at its rival pricing, RUN is at a -31.19% relative to its price target of 9.33. This figure implies that over the next one year, RUN is a better investment.
When looking at the investment recommendation on say a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell), NGD is given a 2.70 while 1.70 placed for RUN. This means that analysts are more bullish on the outlook for NGD stocks.
Insider Activity and Investor Sentiment
Short interest or otherwise called the percentage of a stock’s tradable shares currently being shorted is another data that investors use to get a handle on sentiment. The short ratio for NGD is 2.25 while that of RUN is just 15.03. This means that analysts are more bullish on the forecast for NGD stock.
The stock of Sunrun Inc. defeats that of New Gold Inc. when the two are compared, with RUN taking 6 out of the total factors that were been considered. RUN happens to be more profitable, generates a higher ROI, has higher cash flow per share, higher liquidity and has a lower financial risk. When looking at the stock valuation, RUN is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for RUN is better on when it is viewed on short interest.