Philip Morris International Inc. (NYSE:PM) shares are down more than -2.07% this year and recently decreased -1.46% or -$1.53 to settle at $103.46. Coeur Mining, Inc. (NYSE:CDE), on the other hand, is up 8.67% year to date as of 03/16/2018. It currently trades at $8.15 and has returned -0.37% during the past week.
Philip Morris International Inc. (NYSE:PM) and Coeur Mining, Inc. (NYSE:CDE) are the two most active stocks in the market based on today’s trading volumes. The market is clearly enthusiastic about both these stocks, but which is the better investment? To answer this, we will compare the two companies based on the strength of their growth, profitability, risk, returns, valuation, analyst recommendations, and insider trends.
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 PM to grow earnings at a 10.12% 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., compared to an EBITDA margin of 27.28% for Coeur Mining, Inc. (CDE). PM’s ROI is 39.50% while CDE has a ROI of 1.90%. The interpretation is that PM’s business generates a higher return on investment than CDE’s.
Earnings don’t always accurately reflect the amount of cash that a company brings in. PM’s free cash flow (“FCF”) per share for the trailing twelve months was +0.45. Comparatively, CDE’s free cash flow per share was +0.26. On a percent-of-sales basis, PM’s free cash flow was 0.89% while CDE converted 0.01% of its revenues into cash flow. This means that, for a given level of sales, PM is able to generate more free cash flow for investors.
Liquidity and Financial Risk
Liquidity and leverage ratios measure a company’s ability to meet short-term obligations and longer-term debts. PM has a current ratio of 1.40 compared to 2.00 for CDE. This means that CDE can more easily cover its most immediate liabilities over the next twelve months.
PM trades at a forward P/E of 17.74, and a P/S of 5.67, compared to a forward P/E of 20.95, a P/B of 1.80, and a P/S of 2.16 for CDE. 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
Just because a stock is cheaper doesn’t mean there’s more value to be had. In order to assess value we need to compare the current price to where it’s likely to trade in the future. PM is currently priced at a -13.83% to its one-year price target of 120.07. Comparatively, CDE is -22.38% relative to its price target of 10.50. This suggests that CDE 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 2.20 for PM and 2.30 for CDE, which implies that analysts are more bullish on the outlook for CDE.
Risk and Volatility
Analyst use beta to measure a stock’s volatility relative to the overall market. Stocks with a beta above 1 tend to have bigger swings in price than the market as a whole, the opposite being the case for stocks with a beta below 1. PM has a beta of 0.89 and CDE’s beta is 0.60. CDE’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. PM has a short ratio of 2.06 compared to a short interest of 3.99 for CDE. This implies that the market is currently less bearish on the outlook for PM.
Philip Morris International Inc. (NYSE:PM) beats Coeur Mining, Inc. (NYSE:CDE) on a total of 9 of the 14 factors compared between the two stocks. PM is growing fastly, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate and has lower financial risk. In terms of valuation, PM is the cheaper of the two stocks on an earnings and book value, Finally, PM has better sentiment signals based on short interest.