The shares of IAMGOLD Corporation have increased by more than 5.32% this year alone. The shares recently went up by 9.45% or $0.53 and now trades at $6.14. The shares of Summit Materials, Inc. (NYSE:SUM), has jumped by 0.45% year to date as of 02/14/2018. The shares currently trade at $31.58 and have been able to report a change of 5.30% over the past one week.
The stock of IAMGOLD Corporation and Summit Materials, 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.
Next 5Y EPS Growth: 3.00% versus 25.92%
When a company is able to grow consistently in terms of earnings at a high compound rate have the highest likelihood of creating value for its shareholders over time. Analysts have predicted that IAG will grow it’s earning at a 3.00% annual rate in the next 5 years. This is in contrast to SUM which will have a positive growth at a 25.92% annual rate. This means that the higher growth rate of SUM implies a greater potential for capital appreciation over the years.
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 IAG is 0.10% while that of SUM is 6.70%. These figures suggest that SUM ventures generate a higher ROI than that of IAG.
The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, IAG’s free cash flow per share is a positive 0, while that of SUM is positive 5.07.
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 IAG is 4.80 and that of SUM is 2.60. This implies that it is easier for IAG to cover its immediate obligations over the next 12 months than SUM. The debt ratio of IAG is 0.14 compared to 1.53 for SUM. SUM can be able to settle its long-term debts and thus is a lower financial risk than IAG.
IAG currently trades at a forward P/E of 93.03, a P/B of 1.02, and a P/S of 2.78 while SUM trades at a forward P/E of 22.18, a P/B of 2.88, and a P/S of 1.91. This means that looking at the earnings, book values and sales basis, IAG 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 IAG is currently at a -20.77% to its one-year price target of 7.75. Looking at its rival pricing, SUM is at a -12.35% relative to its price target of 36.03. This figure implies that over the next one year, SUM 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), IAG is given a 2.20 while 1.70 placed for SUM. This means that analysts are more bullish on the outlook for IAG 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 IAG is 1.14 while that of SUM is just 8.19. This means that analysts are more bullish on the forecast for IAG stock.
The stock of IAMGOLD Corporation defeats that of Summit Materials, Inc. when the two are compared, with IAG taking 6 out of the total factors that were been considered. IAG 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, IAG is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for IAG is better on when it is viewed on short interest.