Earnings

Set Sail With 22nd Century Group, Inc. (XXII), GDS Holdings Limited (GDS)

The shares of 22nd Century Group, Inc. have decreased by more than -21.79% this year alone. The shares recently went down by -4.37% or -$0.1 and now trades at $2.19. The shares of GDS Holdings Limited (NASDAQ:GDS), has jumped by 54.33% year to date as of 05/17/2018. The shares currently trade at $34.77 and have been able to report a change of 5.91% over the past one week.

The stock of 22nd Century Group, Inc. and GDS Holdings Limited 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 XXII is -17.60% while that of GDS is 0.80%. These figures suggest that GDS ventures generate a higher ROI than that of XXII.

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, XXII’s free cash flow per share is a negative -0.01, while that of GDS is also a negative -0.03.

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 XXII is 12.50 and that of GDS is 1.50. This implies that it is easier for XXII to cover its immediate obligations over the next 12 months than GDS.

Valuation

XXII currently trades at a P/B of 3.48, and a P/S of 13.54 while GDS trades at a forward P/E of 1086.56, a P/B of 5.76, and a P/S of 15.11. This means that looking at the earnings, book values and sales basis, XXII 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 XXII is currently at a -80.96% to its one-year price target of 11.50. Looking at its rival pricing, GDS is at a 21.02% relative to its price target of 28.73.




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), XXII is given a 2.00 while 2.60 placed for GDS. This means that analysts are more bullish on the outlook for GDS 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 XXII is 6.51 while that of GDS is just 4.47. This means that analysts are more bullish on the forecast for GDS stock.

Conclusion

The stock of GDS Holdings Limited defeats that of 22nd Century Group, Inc. when the two are compared, with GDS taking 4 out of the total factors that were been considered. GDS 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, GDS is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for GDS is better on when it is viewed on short interest.

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