Earnings

NeoPhotonics Corporation (NPTN) is better stock pick than PlayAGS, Inc. (AGS)

The shares of PlayAGS, Inc. have increased by more than 56.49% this year alone. The shares recently went down by -2.69% or -$0.8 and now trades at $28.95. The shares of NeoPhotonics Corporation (NYSE:NPTN), has jumped by 34.95% year to date as of 08/09/2018. The shares currently trade at $8.88 and have been able to report a change of 38.32% over the past one week.

The stock of PlayAGS, Inc. and NeoPhotonics 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.

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 AGS is -0.10% while that of NPTN is -29.70%. These figures suggest that AGS ventures generate a higher ROI than that of NPTN.

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, AGS’s free cash flow per share is a positive 0.01.

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 AGS is 2.70 and that of NPTN is 1.80. This implies that it is easier for AGS to cover its immediate obligations over the next 12 months than NPTN. The debt ratio of AGS is 3.59 compared to 0.47 for NPTN. AGS can be able to settle its long-term debts and thus is a lower financial risk than NPTN.

Valuation

AGS currently trades at a forward P/E of 53.41, a P/B of 7.33, and a P/S of 4.45 while NPTN trades at a P/B of 2.14, and a P/S of 1.33. This means that looking at the earnings, book values and sales basis, AGS 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 AGS is currently at a 3.39% to its one-year price target of 28.00. Looking at its rival pricing, NPTN is at a 0% relative to its price target of 8.88.




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), AGS is given a 1.90 while 2.30 placed for NPTN. This means that analysts are more bullish on the outlook for NPTN 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 AGS is 3.35 while that of NPTN is just 10.60. This means that analysts are more bullish on the forecast for AGS stock.

Conclusion

The stock of NeoPhotonics Corporation defeats that of PlayAGS, Inc. when the two are compared, with NPTN taking 6 out of the total factors that were been considered. NPTN 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, NPTN is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for NPTN is better on when it is viewed on short interest.

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