Earnings

Comparing Valuation And Performance: Fairmount Santrol Holdings Inc. (FMSA), Telecom Argentina S.A. (TEO)

The shares of Fairmount Santrol Holdings Inc. have increased by more than 18.55% this year alone. The shares recently went up by 2.31% or $0.14 and now trades at $6.20. The shares of Telecom Argentina S.A. (NYSE:TEO), has slumped by -35.41% year to date as of 05/17/2018. The shares currently trade at $23.11 and have been able to report a change of -4.98% over the past one week.

The stock of Fairmount Santrol Holdings Inc. and Telecom Argentina S.A. were two of the most active stocks on Thuday. Investors seem to be very interested in what happens to the stocks of these two companies but do investors favor one over the other? We will analyze the growth, profitability, risk, valuation, and insider trends of both companies and see which one investors prefer.

Profitability and Returns

Growth alone cannot be used to see if the company will be valuable. Shareholders will be the losers if a company invest in ventures that aren’t profitable enough to support upbeat growth. In order for us to accurately measure profitability and return, we will be using the EBITDA margin and Return on Investment (ROI), which balances the difference in capital structure. FMSA has an EBITDA margin of 15.26%, this implies that the underlying business of FMSA is more profitable. The ROI of FMSA is 12.30% while that of TEO is 23.70%. These figures suggest that TEO ventures generate a higher ROI than that of FMSA.

Cash Flow

The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, FMSA’s free cash flow per share is a positive -0, while that of TEO is negative -17.3.

Liquidity and Financial Risk



The ability of a company to meet up with its short-term obligations and be able to clear its longer-term debts is measured using Liquidity and leverage ratios. The current ratio for FMSA is 2.20 and that of TEO is 0.80. This implies that it is easier for FMSA to cover its immediate obligations over the next 12 months than TEO. The debt ratio of FMSA is 2.26 compared to 0.50 for TEO. FMSA can be able to settle its long-term debts and thus is a lower financial risk than TEO.

Valuation

FMSA currently trades at a forward P/E of 11.40, a P/B of 4.28, and a P/S of 1.36 while TEO trades at a forward P/E of 12.95, a P/B of 4.40, and a P/S of 1.15. This means that looking at the earnings, book values and sales basis, FMSA is the cheaper one. It is very obvious that earnings are the most important factors to investors, thus analysts are most likely to place their bet on the P/E.

Analyst Price Targets and Opinions

The mistake some people make is that they think a cheap stock has more value to it. In order to know the value of a stock, there is need to compare its current price to its likely trading price in the future. The price of FMSA is currently at a 3.85% to its one-year price target of 5.97. Looking at its rival pricing, TEO is at a -36.12% relative to its price target of 36.18.




When looking at the investment recommendation on say a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell), FMSA is given a 2.20 while 2.80 placed for TEO. This means that analysts are more bullish on the outlook for TEO stocks.

Insider Activity and Investor Sentiment

Short interest or otherwise called the percentage of a stock’s tradable shares currently being shorted is another data that investors use to get a handle on sentiment. The short ratio for FMSA is 10.82 while that of TEO is just 1.57. This means that analysts are more bullish on the forecast for TEO stock.

Conclusion

The stock of Fairmount Santrol Holdings Inc. defeats that of Telecom Argentina S.A. when the two are compared, with FMSA taking 7 out of the total factors that were been considered. FMSA happens to be more profitable, generates a higher ROI, has higher cash flow per share, higher liquidity and has a lower financial risk. When looking at the stock valuation, FMSA is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for FMSA is better on when it is viewed on short interest.

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