Earnings

Uncovering the next great stocks: KEMET Corporation (KEM), Adesto Technologies Corporation (IOTS)

The shares of KEMET Corporation have increased by more than 91.57% this year alone. The shares recently went up by 2.30% or $0.65 and now trades at $28.85. The shares of Adesto Technologies Corporation (NASDAQ:IOTS), has slumped by -5.81% year to date as of 07/12/2018. The shares currently trade at $6.07 and have been able to report a change of -28.53% over the past one week.

The stock of KEMET Corporation and Adesto Technologies Corporation 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.

Next 5Y EPS Growth: 12.00% versus 15.00%

When a company is able to grow consistently in terms of earnings at a high compound rate have the highest likelihood of creating value for its shareholders over time. Analysts have predicted that KEM will grow it’s earning at a 12.00% annual rate in the next 5 years. This is in contrast to IOTS which will have a positive growth at a 15.00% annual rate. This means that the higher growth rate of IOTS implies a greater potential for capital appreciation over the years.

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. KEM has an EBITDA margin of 22.72%, this implies that the underlying business of KEM is more profitable. The ROI of KEM is 36.20% while that of IOTS is 15.80%. These figures suggest that KEM ventures generate a higher ROI than that of IOTS.

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, KEM’s free cash flow per share is a positive 0.57.

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 KEM is 2.40 and that of IOTS is 2.40. This implies that it is easier for KEM to cover its immediate obligations over the next 12 months than IOTS. The debt ratio of KEM is 0.70 compared to 0.41 for IOTS. KEM can be able to settle its long-term debts and thus is a lower financial risk than IOTS.

Valuation

KEM currently trades at a forward P/E of 14.87, a P/B of 3.56, and a P/S of 1.32 while IOTS trades at a forward P/E of 13.68, a P/B of 4.00, and a P/S of 2.12. This means that looking at the earnings, book values and sales basis, KEM 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 KEM is currently at a 28.91% to its one-year price target of 22.38. Looking at its rival pricing, IOTS is at a -45.32% relative to its price target of 11.10.

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), KEM is given a 2.50 while 1.80 placed for IOTS. This means that analysts are more bullish on the outlook for KEM 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 KEM is 1.60 while that of IOTS is just 0.60. This means that analysts are more bullish on the forecast for IOTS stock.

Conclusion

The stock of KEMET Corporation defeats that of Adesto Technologies Corporation when the two are compared, with KEM taking 7 out of the total factors that were been considered. KEM 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, KEM is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for KEM is better on when it is viewed on short interest.

Previous ArticleNext Article

Related Post

Which is more compelling pick right now? – C... The shares of CNH Industrial N.V. have decreased by more than -6.04% this year alone. The shares recently went up by 2.44% or $0.3 and now trades at $...
Choosing Between AK Steel Holding Corporation (AKS... AK Steel Holding Corporation (NYSE:AKS) shares are down more than -52.11% this year and recently increased 0.41% or $0.02 to settle at $4.89. United S...
Choosing Between Hot Stocks: Edison International ... The shares of Edison International have decreased by more than -2.42% this year alone. The shares recently went up by 2.14% or $1.29 and now trades at...
Comparing NCI Building Systems, Inc. (NCS) and Sum... NCI Building Systems, Inc. (NYSE:NCS) shares are up more than 23.32% this year and recently increased 2.12% or $0.4 to settle at $19.30. Summit Materi...
Calgon Carbon Corporation (CCC) vs. Energy Recover... Calgon Carbon Corporation (NYSE:CCC) shares are up more than 25.88% this year and recently decreased -0.23% or -$0.05 to settle at $21.40. Energy Reco...