Earnings

A Comparison of Top Movers: China TechFaith Wireless Communication Technology Limited (CNTF), TransEnterix, Inc. (TRXC)

The shares of China TechFaith Wireless Communication Technology Limited have increased by more than 15.87% this year alone. The shares recently went up by 63.93% or $1.17 and now trades at $3.00. The shares of TransEnterix, Inc. (NYSE:TRXC), has jumped by 130.05% year to date as of 07/12/2018. The shares currently trade at $4.44 and have been able to report a change of 8.29% over the past one week.

The stock of China TechFaith Wireless Communication Technology Limited and TransEnterix, Inc. were two of the most active stocks on Thursday. 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 CNTF is -2.00% while that of TRXC is -30.50%. These figures suggest that CNTF ventures generate a higher ROI than that of TRXC.

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, CNTF’s free cash flow per share is a positive 0, while that of TRXC is negative -0.17.

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 CNTF is 2.60 and that of TRXC is 5.40. This implies that it is easier for CNTF to cover its immediate obligations over the next 12 months than TRXC. The debt ratio of CNTF is 0.07 compared to 0.07 for TRXC. TRXC can be able to settle its long-term debts and thus is a lower financial risk than CNTF.

Valuation

CNTF currently trades at a P/B of 0.12, and a P/S of 0.67 while TRXC trades at a P/B of 4.72, and a P/S of 86.96. This means that looking at the earnings, book values and sales basis, CNTF 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 CNTF is currently at a 71.43% to its one-year price target of 1.75. Looking at its rival pricing, TRXC is at a -1.33% relative to its price target of 4.50.

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 CNTF is 0.58 while that of TRXC is just 4.42. This means that analysts are more bullish on the forecast for CNTF stock.

Conclusion

The stock of TransEnterix, Inc. defeats that of China TechFaith Wireless Communication Technology Limited when the two are compared, with TRXC taking 4 out of the total factors that were been considered. TRXC 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, TRXC is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for TRXC is better on when it is viewed on short interest.

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