Sibanye Gold Limited (NYSE:SBGL) shares are down more than -27.30% this year and recently decreased -4.08% or -$0.15 to settle at $3.53. DPW Holdings, Inc. (NYSE:DPW), on the other hand, is down -64.17% year to date as of 04/16/2018. It currently trades at $1.15 and has returned 46.50% during the past week.
Sibanye Gold Limited (NYSE:SBGL) and DPW Holdings, Inc. (NYSE:DPW) are the two most active stocks in the Gold industry 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.Growth
The ability to grow earnings at a compound rate over time is a crucial determinant of investment value. Analysts expect SBGL to grow earnings at a 1.30% annual rate over the next 5 years.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. Sibanye Gold Limited (SBGL) has an EBITDA margin of 14.65%. This suggests that SBGL underlying business is more profitable SBGL’s ROI is 0.70% while DPW has a ROI of -30.70%. The interpretation is that SBGL’s business generates a higher return on investment than DPW’s.Cash Flow
Cash is king when it comes to investing. On a percent-of-sales basis, SBGL’s free cash flow was 0% while DPW converted -0.01% of its revenues into cash flow. This means that, for a given level of sales, SBGL 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. SBGL has a current ratio of 1.40 compared to 0.60 for DPW. This means that SBGL can more easily cover its most immediate liabilities over the next twelve months. SBGL’s debt-to-equity ratio is 1.07 versus a D/E of 0.55 for DPW. SBGL is therefore the more solvent of the two companies, and has lower financial risk.Valuation
SBGL trades at a forward P/E of 6.66, a P/B of 1.09, and a P/S of 0.57, compared to a P/B of 2.35, and a P/S of 3.99 for DPW. 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”. SBGL is currently priced at a -32.76% to its one-year price target of 5.25. Comparatively, DPW is -95.54% relative to its price target of 25.81. This suggests that DPW is the better investment over the next year.
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. SBGL has a beta of 0.07 and DPW’s beta is 2.53. SBGL’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. SBGL has a short ratio of 3.79 compared to a short interest of 1.26 for DPW. This implies that the market is currently less bearish on the outlook for DPW.Summary
Sibanye Gold Limited (NYSE:SBGL) beats DPW Holdings, Inc. (NYSE:DPW) on a total of 9 of the 14 factors compared between the two stocks. SBGL is growing fastly, is more profitable, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate and higher liquidity. In terms of valuation, SBGL is the cheaper of the two stocks on book value and sales basis, Finally, BSBR has better sentiment signals based on short interest.