Global

Snap Inc. (SNAP) vs. Barrick Gold Corporation (ABX): Comparing the Internet Software & Services Industry’s Most Active Stocks

Snap Inc. (NYSE:SNAP) shares are down more than -27.65% this year and recently decreased -0.09% or -$0.01 to settle at $10.57. Barrick Gold Corporation (NYSE:ABX), on the other hand, is down -8.85% year to date as of 05/17/2018. It currently trades at $13.19 and has returned -2.51% during the past week.

Snap Inc. (NYSE:SNAP) and Barrick Gold Corporation (NYSE:ABX) are the two most active stocks in the Internet Software & Services 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

One of the key things investors look for in a company is the ability to grow earnings at a high compound rate over time. Comparatively, ABX is expected to grow at a -4.45% annual rate. All else equal, SNAP’s higher growth rate would imply a greater potential for capital appreciation.

Profitability and Returns

Growth in and of itself is not necessarily valuable, and it can even be harmful to shareholders if companies overinvest in unprofitable projects in pursuit of that growth. We will use Return on Investment (ROI), which adjust for differences in capital structure, as measure of profitability and return. SNAP’s ROI is -102.10% while ABX has a ROI of 11.10%. The interpretation is that ABX’s business generates a higher return on investment than SNAP’s.

Cash Flow



Cash is king when it comes to investing. SNAP’s free cash flow (“FCF”) per share for the trailing twelve months was -0.21. Comparatively, ABX’s free cash flow per share was +0.16. On a percent-of-sales basis, SNAP’s free cash flow was -0.03% while ABX converted 2.23% of its revenues into cash flow. This means that, for a given level of sales, ABX is able to generate more free cash flow for investors.

Liquidity and Financial Risk

Liquidity and leverage ratios measure a company’s ability to meet short-term obligations and longer-term debts. SNAP has a current ratio of 7.00 compared to 2.80 for ABX. This means that SNAP can more easily cover its most immediate liabilities over the next twelve months. SNAP’s debt-to-equity ratio is 0.00 versus a D/E of 0.68 for ABX. ABX is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

SNAP trades at a P/B of 4.80, and a P/S of 14.64, compared to a forward P/E of 18.07, a P/B of 1.62, and a P/S of 1.88 for ABX. SNAP is the cheaper of the two stocks on an earnings basis but is expensive in terms of P/B and P/S ratio. 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”. SNAP is currently priced at a -11.7% to its one-year price target of 11.97. Comparatively, ABX is -16.25% relative to its price target of 15.75. This suggests that ABX is the better investment over the next year.

Insider Activity and Investor Sentiment

Short interest is another tool that analysts use to gauge investor sentiment. It represents the percentage of a stock’s tradable shares that are being shorted. SNAP has a short ratio of 3.51 compared to a short interest of 1.06 for ABX. This implies that the market is currently less bearish on the outlook for ABX.

Summary




Barrick Gold Corporation (NYSE:ABX) beats Snap Inc. (NYSE:SNAP) on a total of 9 of the 14 factors compared between the two stocks. ABX is growing fastly, has higher cash flow per share and has a higher cash conversion rate. In terms of valuation, ABX is the cheaper of the two stocks on book value and sales basis, ABX is more undervalued relative to its price target. Finally, ABX has better sentiment signals based on short interest.

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