The shares of Cintas Corporation have increased by more than 5.47% this year alone. The shares recently went up by 5.31% or $8.29 and now trades at $164.36. The shares of Synaptics Incorporated (NASDAQ:SYNA), has jumped by 16.22% year to date as of 02/14/2018. The shares currently trade at $46.42 and have been able to report a change of 13.22% over the past one week.
The stock of Cintas Corporation and Synaptics Incorporated 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: 13.55% versus 12.50%
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 CTAS will grow it’s earning at a 13.55% annual rate in the next 5 years. This is in contrast to SYNA which will have a positive growth at a 12.50% annual rate. This means that the higher growth rate of CTAS 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. CTAS has an EBITDA margin of 19.15%, this implies that the underlying business of CTAS is more profitable. The ROI of CTAS is 10.00% while that of SYNA is 5.70%. These figures suggest that CTAS ventures generate a higher ROI than that of SYNA.
The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, CTAS’s free cash flow per share is a positive 1, while that of SYNA is positive 3.25.
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 CTAS is 1.80 and that of SYNA is 2.40. This implies that it is easier for CTAS to cover its immediate obligations over the next 12 months than SYNA. The debt ratio of CTAS is 1.11 compared to 0.65 for SYNA. CTAS can be able to settle its long-term debts and thus is a lower financial risk than SYNA.
CTAS currently trades at a forward P/E of 24.51, a P/B of 6.85, and a P/S of 2.88 while SYNA trades at a forward P/E of 9.49, a P/B of 2.31, and a P/S of 0.91. This means that looking at the earnings, book values and sales basis, SYNA 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 CTAS is currently at a -1.97% to its one-year price target of 167.67. Looking at its rival pricing, SYNA is at a -3.71% relative to its price target of 48.21. This figure implies that over the next one year, SYNA 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), CTAS is given a 2.60 while 2.50 placed for SYNA. This means that analysts are more bullish on the outlook for CTAS 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 CTAS is 6.49 while that of SYNA is just 8.18. This means that analysts are more bullish on the forecast for CTAS stock.
The stock of Cintas Corporation defeats that of Synaptics Incorporated when the two are compared, with CTAS taking 4 out of the total factors that were been considered. CTAS 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, CTAS is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for CTAS is better on when it is viewed on short interest.