Earnings

Reliable Long-term Trend to Profit From: GNC Holdings, Inc. (GNC), Ferroglobe PLC (GSM)

The shares of GNC Holdings, Inc. have decreased by more than -8.13% this year alone. The shares recently went down by -5.04% or -$0.18 and now trades at $3.39. The shares of Ferroglobe PLC (NASDAQ:GSM), has slumped by -34.01% year to date as of 05/17/2018. The shares currently trade at $10.69 and have been able to report a change of -4.64% over the past one week.

The stock of GNC Holdings, Inc. and Ferroglobe PLC 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. The ROI of GNC is -15.80% while that of GSM is 1.80%. These figures suggest that GSM ventures generate a higher ROI than that of GNC.

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, GNC’s free cash flow per share is a positive 0.89, while that of GSM is positive 7.9.

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 GNC is 1.50 and that of GSM is 1.50. This implies that it is easier for GNC to cover its immediate obligations over the next 12 months than GSM.

Valuation

GNC currently trades at a forward P/E of 5.30, and a P/S of 0.12 while GSM trades at a forward P/E of 8.82, a P/B of 2.25, and a P/S of 1.07. This means that looking at the earnings, book values and sales basis, GNC 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 GNC is currently at a 0.3% to its one-year price target of 3.38. Looking at its rival pricing, GSM is at a -38.91% relative to its price target of 17.50.




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), GNC is given a 3.60 while 1.40 placed for GSM. This means that analysts are more bullish on the outlook for GNC 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 GNC is 10.93 while that of GSM is just 4.05. This means that analysts are more bullish on the forecast for GSM stock.

Conclusion

The stock of GNC Holdings, Inc. defeats that of Ferroglobe PLC when the two are compared, with GNC taking 5 out of the total factors that were been considered. GNC 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, GNC is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for GNC is better on when it is viewed on short interest.

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