Intercontinental Exchange, Inc. (NYSE:ICE) shares are up more than 6.38% this year and recently decreased -0.81% or -$0.61 to settle at $75.06. Synergy Pharmaceuticals Inc. (NASDAQ:SGYP), on the other hand, is down -5.83% year to date as of 03/13/2018. It currently trades at $2.10 and has returned -0.47% during the past week.
Intercontinental Exchange, Inc. (NYSE:ICE) and Synergy Pharmaceuticals Inc. (NASDAQ:SGYP) are the two most active stocks in the market based on today’s trading volumes. To determine if one is a better investment than the other, we will compare the two companies’ growth, profitability, risk, return, and valuation characteristics, as well as their analyst ratings and sentiment signals.
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 ICE to grow earnings at a 15.85% annual rate over the next 5 years.
Profitability and Returns
Growth isn’t very attractive to investors if companies are sacrificing profitability and shareholder returns to achieve that growth. We will use EBITDA margin and Return on Investment (ROI), which control for differences in capital structure between the two companies, to measure profitability and return. Intercontinental Exchange, Inc. (ICE) has an EBITDA margin of 55.52%. This suggests that ICE underlying business is more profitable ICE’s ROI is 7.10% while SGYP has a ROI of -201.10%. The interpretation is that ICE’s business generates a higher return on investment than SGYP’s.
Earnings don’t always accurately reflect the amount of cash that a company brings in. ICE’s free cash flow (“FCF”) per share for the trailing twelve months was +0.80. Comparatively, SGYP’s free cash flow per share was -0.26. On a percent-of-sales basis, ICE’s free cash flow was 10.06% while SGYP converted -0.38% of its revenues into cash flow. This means that, for a given level of sales, ICE is able to generate more free cash flow for investors.
Liquidity and Financial Risk
Balance sheet risk is one of the biggest factors to consider before investing. ICE has a current ratio of 1.00 compared to 4.30 for SGYP. This means that SGYP can more easily cover its most immediate liabilities over the next twelve months.
ICE trades at a forward P/E of 18.99, a P/B of 2.59, and a P/S of 9.31, compared to a P/S of 30.97 for SGYP. ICE is the cheaper of the two stocks on sales basis but is expensive in terms of P/E and P/B 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
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. ICE is currently priced at a -7.41% to its one-year price target of 81.07. Comparatively, SGYP is -70.34% relative to its price target of 7.08. This suggests that SGYP 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 1.90 for ICE and 2.30 for SGYP, which implies that analysts are more bullish on the outlook for SGYP.
Risk and Volatility
Beta is a metric that investors frequently use to analyze a stock’s systematic risk. A beta above 1 implies above average market volatility. Conversely, a stock with a beta below 1 is seen as less risky than the overall market. ICE has a beta of 0.64 and SGYP’s beta is 1.22. ICE’s shares are therefore the less volatile of the two stocks.
Insider Activity and Investor Sentiment
Short interest, or the percentage of a stock’s tradable shares currently being shorted, is another metric investors use to get a pulse on sentiment.ICE has a short ratio of 1.57 compared to a short interest of 9.73 for SGYP. This implies that the market is currently less bearish on the outlook for ICE.
Intercontinental Exchange, Inc. (NYSE:ICE) beats Synergy Pharmaceuticals Inc. (NASDAQ:SGYP) on a total of 9 of the 14 factors compared between the two stocks. ICE is growing fastly, is more profitable, generates a higher return on investment, has higher cash flow per share and has a higher cash conversion rate. Finally, ICE has better sentiment signals based on short interest.