Earnings

Financially Devastating or Fantastic? – Infinera Corporation (INFN), Axovant Sciences Ltd. (AXON)

The shares of Infinera Corporation have increased by more than 53.08% this year alone. The shares recently went down by -1.22% or -$0.12 and now trades at $9.69. The shares of Axovant Sciences Ltd. (NASDAQ:AXON), has slumped by -52.56% year to date as of 07/12/2018. The shares currently trade at $2.50 and have been able to report a change of -3.10% over the past one week.

The stock of Infinera Corporation and Axovant Sciences Ltd. 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. These figures suggest that AXON ventures generate a higher ROI than that of INFN.

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 INFN is 1.70 and that of AXON is 3.40. This implies that it is easier for INFN to cover its immediate obligations over the next 12 months than AXON. The debt ratio of INFN is 0.22 compared to 0.74 for AXON. AXON can be able to settle its long-term debts and thus is a lower financial risk than INFN.

Valuation



INFN currently trades at a forward P/E of 48.21, a P/B of 2.17, and a P/S of 1.90 while AXON trades at a P/B of 3.79, This means that looking at the earnings, book values and sales basis, INFN 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 INFN is currently at a -15.74% to its one-year price target of 11.50. Looking at its rival pricing, AXON is at a -72.74% relative to its price target of 9.17.

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), INFN is given a 2.60 while 2.70 placed for AXON. This means that analysts are more bullish on the outlook for AXON 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 INFN is 10.06 while that of AXON is just 0.84. This means that analysts are more bullish on the forecast for AXON stock.

Conclusion

The stock of Infinera Corporation defeats that of Axovant Sciences Ltd. when the two are compared, with INFN taking 5 out of the total factors that were been considered. INFN 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, INFN is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for INFN is better on when it is viewed on short interest.

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