Gold Fields Limited (NYSE:GFI) shares are down more than -10.47% this year and recently decreased -1.79% or -$0.07 to settle at $3.85. Royal Dutch Shell plc (NYSE:RDS-B), on the other hand, is down -6.88% year to date as of 03/13/2018. It currently trades at $63.59 and has returned -2.39% during the past week.
Gold Fields Limited (NYSE:GFI) and Royal Dutch Shell plc (NYSE:RDS-B) are the two most active stocks in the market based on today’s trading volumes. Investor interest in the two stocks is clearly very high, but which is the better investment? To answer this question, we will compare the two companies across growth, profitability, risk, and valuation metrics, and also examine their analyst ratings and insider activity trends.
Companies that can consistently grow earnings at a high compound rate usually have the greatest potential to create value for shareholders in the long-run. Analysts expect GFI to grow earnings at a 9.10% annual rate over the next 5 years. Comparatively, RDS-B is expected to grow at a -7.10% annual rate. All else equal, GFI’s higher growth rate would imply a greater potential for capital appreciation.
GFI trades at a forward P/E of 12.62, a P/B of 0.96, and a P/S of 1.17, compared to a forward P/E of 10.09, a P/B of 1.36, and a P/S of 0.84 for RDS-B. GFI is the cheaper of the two stocks on book value basis but is expensive in terms of P/E and P/S ratio. 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
A cheap stock isn’t a good investment if the stock is priced accurately. To get a sense of “value” we must compare the current price to some measure of intrinsic value such as a price target. GFI is currently priced at a -14.25% to its one-year price target of 4.49. Comparatively, RDS-B is -20.18% relative to its price target of 79.67. This suggests that RDS-B 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 3.00 for GFI and 1.30 for RDS-B, which implies that analysts are more bullish on the outlook for GFI.
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. GFI has a short ratio of 1.21 compared to a short interest of 4.39 for RDS-B. This implies that the market is currently less bearish on the outlook for GFI.
Gold Fields Limited (NYSE:GFI) beats Royal Dutch Shell plc (NYSE:RDS-B) on a total of 7 of the 13 factors compared between the two stocks. GFI is growing fastly, generates a higher return on investment, has higher cash flow per share and higher liquidity. Finally, GFI has better sentiment signals based on short interest.