Yamana Gold Inc. (NYSE:AUY) shares are down more than -10.26% this year and recently increased 0.36% or $0.01 to settle at $2.80. CSX Corporation (NASDAQ:CSX), on the other hand, is up 15.47% year to date as of 05/17/2018. It currently trades at $63.52 and has returned 1.13% during the past week.
Yamana Gold Inc. (NYSE:AUY) and CSX Corporation (NASDAQ:CSX) are the two most active stocks in the Gold industry based on today’s trading volumes. Investors are clearly interested in the two names, but is one a better choice than the other? We will compare the two companies across growth, profitability, risk, valuation, and insider trends to answer this question.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. Analysts expect AUY to grow earnings at a 16.03% annual rate over the next 5 years. Comparatively, CSX is expected to grow at a 18.74% annual rate. All else equal, CSX’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 EBITDA margin and Return on Investment (ROI), which adjust for differences in capital structure, as measure of profitability and return. EBITDA margin of 46.85% for CSX Corporation (CSX). AUY’s ROI is -1.10% while CSX has a ROI of 9.40%. The interpretation is that CSX’s business generates a higher return on investment than AUY’s.Cash Flow
The amount of free cash flow available to investors is ultimately what determines the value of a stock. AUY’s free cash flow (“FCF”) per share for the trailing twelve months was -0.06. Comparatively, CSX’s free cash flow per share was +0.45. On a percent-of-sales basis, AUY’s free cash flow was -3.16% while CSX converted 3.45% of its revenues into cash flow. This means that, for a given level of sales, CSX is able to generate more free cash flow for investors.Liquidity and Financial Risk
Analysts look at liquidity and leverage ratios to assess how easily a company can cover its liabilities. AUY has a current ratio of 1.10 compared to 1.90 for CSX. This means that CSX can more easily cover its most immediate liabilities over the next twelve months. AUY’s debt-to-equity ratio is 0.42 versus a D/E of 0.96 for CSX. CSX is therefore the more solvent of the two companies, and has lower financial risk.Valuation
AUY trades at a forward P/E of 16.18, a P/B of 0.64, and a P/S of 1.44, compared to a forward P/E of 16.94, a P/B of 3.91, and a P/S of 4.91 for CSX. AUY is the cheaper of the two stocks on an earnings, book value and sales basis. 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
A cheap stock isn’t a good investment if the stock is priced accurately. To get a sense of “value” we must compare the current price to some measure of intrinsic value such as a price target. AUY is currently priced at a -27.46% to its one-year price target of 3.86. Comparatively, CSX is 0.21% relative to its price target of 63.39. This suggests that AUY is the better investment over the next year.
Risk and Volatility
Beta is a metric that investors frequently use to analyze a stock’s systematic risk. A beta above 1 implies above average market volatility. Conversely, a stock with a beta below 1 is seen as less risky than the overall market. AUY has a beta of 0.94 and CSX’s beta is 1.21. AUY’s shares are therefore the less volatile of the two stocks.Insider Activity and Investor Sentiment
Short interest, or the percentage of a stock’s tradable shares currently being shorted, is another metric investors use to get a pulse on sentiment. AUY has a short ratio of 0.63 compared to a short interest of 2.45 for CSX. This implies that the market is currently less bearish on the outlook for AUY.Summary
CSX Corporation (NASDAQ:CSX) beats Yamana Gold Inc. (NYSE:AUY) on a total of 7 of the 14 factors compared between the two stocks. CSX has lower financial risk, 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, AUY is the cheaper of the two stocks on an earnings, book value and sales basis, Finally, SWN has better sentiment signals based on short interest.