Transocean Ltd. (NYSE:RIG) shares are down more than -12.92% this year and recently increased 0.87% or $0.08 to settle at $9.30. Akers Biosciences, Inc. (NASDAQ:AKER), on the other hand, is up 197.91% year to date as of 02/14/2018. It currently trades at $0.40 and has returned -2.63% during the past week.
Transocean Ltd. (NYSE:RIG) and Akers Biosciences, Inc. (NASDAQ:AKER) are the two most active stocks in the market based on today’s trading volumes. We will compare the two companies based on the strength of various metrics, including growth, profitability, risk, return, and valuation to determine if one is a better investment than the other.
The ability to consistently grow earnings at a high compound rate is a defining characteristic of the best companies for long-term investment. Analysts expect RIG to grow earnings at a 5.00% annual rate over the next 5 years.
Profitability and Returns
Growth in and of itself is not necessarily valuable, and it can even be harmful to shareholders if companies overinvest in unprofitable projects in pursuit of that growth. We will use Return on Investment (ROI), which adjust for differences in capital structure, as measure of profitability and return. RIG’s ROI is 4.20% while AKER has a ROI of -97.90%. The interpretation is that RIG’s business generates a higher return on investment than AKER’s.
If there’s one thing investors care more about than earnings, it’s cash flow. RIG’s free cash flow (“FCF”) per share for the trailing twelve months was +0.65. Comparatively, AKER’s free cash flow per share was -0.12. On a percent-of-sales basis, RIG’s free cash flow was 7.16% while AKER converted -0.1% of its revenues into cash flow. This means that, for a given level of sales, RIG 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. RIG has a current ratio of 2.40 compared to 2.50 for AKER. This means that AKER can more easily cover its most immediate liabilities over the next twelve months. RIG’s debt-to-equity ratio is 0.57 versus a D/E of 0.00 for AKER. RIG is therefore the more solvent of the two companies, and has lower financial risk.
RIG trades at a P/B of 0.28, and a P/S of 1.08, compared to a forward P/E of 2.85, a P/B of 0.91, and a P/S of 7.54 for AKER. RIG 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
Investors often compare a stock’s current price to an analyst price target to get a sense of the potential upside within the next year. RIG is currently priced at a -27.23% to its one-year price target of 12.78. Comparatively, AKER is -90% relative to its price target of 4.00. This suggests that AKER is the better investment over the next year.
The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 2.70 for RIG and 2.00 for AKER, which implies that analysts are more bullish on the outlook for RIG.
Risk and Volatility
Beta is an important measure that gives investors a sense of the market risk associated with a particular stock. A beta above 1 signals above average market risk, while a beta below 1 implies below average volatility. RIG has a beta of 1.48 and AKER’s beta is -0.32. AKER’s shares are therefore the less volatile of the two stocks.
Insider Activity and Investor Sentiment
Analysts often look at short interest, or the percentage of a company’s float currently being shorted by investors, to aid in their outlook for a particular stock. RIG has a short ratio of 7.04 compared to a short interest of 0.85 for AKER. This implies that the market is currently less bearish on the outlook for AKER.
Transocean Ltd. (NYSE:RIG) beats Akers Biosciences, Inc. (NASDAQ:AKER) on a total of 7 of the 14 factors compared between the two stocks. RIG is growing fastly, generates a higher return on investment, has higher cash flow per share and has a higher cash conversion rate. In terms of valuation, RIG is the cheaper of the two stocks on an earnings, book value and sales basis, Finally, SO has better sentiment signals based on short interest.