Finance

Teck Resources Limited (TECK) vs. Frontier Communications Corporation (FTR): Breaking Down the Industrial Metals & Minerals Industry’s Two Hottest Stocks

Teck Resources Limited (NYSE:TECK) shares are up more than 1.91% this year and recently increased 1.99% or $0.52 to settle at $26.67. Frontier Communications Corporation (NASDAQ:FTR), on the other hand, is up 22.34% year to date as of 04/13/2018. It currently trades at $8.27 and has returned 7.12% during the past week.

Teck Resources Limited (NYSE:TECK) and Frontier Communications Corporation (NASDAQ:FTR) are the two most active stocks in the Industrial Metals & Minerals industry 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.

Growth

Companies that can increase earnings at a high compound rate over time are attractive to investors. Analysts expect TECK to grow earnings at a -9.06% annual rate over the next 5 years. Comparatively, FTR is expected to grow at a 7.30% annual rate. All else equal, FTR’s higher growth rate would imply a greater potential for capital appreciation.

Profitability and Returns

Just, if not more, important than the growth rate is the quality of that growth. Growth can actual be harmful to investors if it comes at the cost of weak profitability and low returns. To adjust for differences in capital structure we’ll use EBITDA margin and Return on Investment (ROI) as measures of profitability and return. EBITDA margin of 6.18% for Frontier Communications Corporation (FTR). TECK’s ROI is 11.00% while FTR has a ROI of -5.50%. The interpretation is that TECK’s business generates a higher return on investment than FTR’s.

Cash Flow



If there’s one thing investors care more about than earnings, it’s cash flow. TECK’s free cash flow (“FCF”) per share for the trailing twelve months was +0.66. Comparatively, FTR’s free cash flow per share was +3.11. On a percent-of-sales basis, TECK’s free cash flow was 4.02% while FTR converted 2.67% of its revenues into cash flow. This means that, for a given level of sales, TECK 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. TECK has a current ratio of 1.80 compared to 0.50 for FTR. This means that TECK can more easily cover its most immediate liabilities over the next twelve months. TECK’s debt-to-equity ratio is 0.33 versus a D/E of 7.75 for FTR. FTR is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

TECK trades at a forward P/E of 8.69, a P/B of 1.00, and a P/S of 1.61, compared to a P/B of 0.28, and a P/S of 0.07 for FTR. TECK is the expensive 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

When investing it’s crucial to distinguish between price and value. As Warren Buffet said, “price is what you pay, value is what you get”. TECK is currently priced at a -16.97% to its one-year price target of 32.12. Comparatively, FTR is -0.6% relative to its price target of 8.32. This suggests that TECK is the better investment over the next year.

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. TECK has a beta of 1.55 and FTR’s beta is 0.68. FTR’s shares are therefore the less volatile of the two stocks.

Insider Activity and Investor Sentiment




The analysis of insider buying and selling trends can be extended to the aggregate level. Short interest, which represents the percentage of a stock’s tradable shares currently being shorted, captures what the market as a whole feels about a stock. TECK has a short ratio of 2.39 compared to a short interest of 0.08 for FTR. This implies that the market is currently less bearish on the outlook for FTR.

Summary

Frontier Communications Corporation (NASDAQ:FTR) beats Teck Resources Limited (NYSE:TECK) on a total of 8 of the 14 factors compared between the two stocks. FTR generates a higher return on investment, is more profitable and has higher cash flow per share. In terms of valuation, FTR is the cheaper of the two stocks on an earnings, book value and sales basis, Finally, FTR has better sentiment signals based on short interest.

Previous ArticleNext Article

Related Post

Are Investors Buying or Selling Abbott Laboratorie... Recent insider trends for Abbott Laboratories (NYSE:ABT) have caught the attention of investors. Insider data is useful because it can reveal what a c...
Should You Buy The Mosaic Company (MOS) or Wolveri... The Mosaic Company (NYSE:MOS) shares are down more than -2.46% this year and recently increased 2.20% or $0.54 to settle at $25.03. Wolverine World Wi...
Critical Comparison: The Procter & Gamble Com... The Procter & Gamble Company (NYSE:PG) shares are down more than -16.92% this year and recently increased 0.65% or $0.49 to settle at $76.33. Env...
Looking at the Big Picture for Express, Inc. (EXPR... Express, Inc. (NYSE:EXPR) is an interesting stock at present. Now trading with a market value of 486.92M, the company has a mix of catalysts and obsta...
Acorda Therapeutics, Inc. (ACOR) Daily Technical R... Acorda Therapeutics, Inc. (NASDAQ:ACOR) gained 6.39% in yesterday’s session, going up from its prior closing price of $19.55 to $20.80, and has now re...