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A Side-by-side Analysis of Community Health Systems, Inc. (CYH) and Sandstorm Gold Ltd. (SAND)

Community Health Systems, Inc. (NYSE:CYH) shares are down more than -24.88% this year and recently increased 0.63% or $0.02 to settle at $3.20. Sandstorm Gold Ltd. (NYSE:SAND), on the other hand, is down -24.85% year to date as of 09/11/2018. It currently trades at $3.75 and has returned 0.27% during the past week.

Community Health Systems, Inc. (NYSE:CYH) and Sandstorm Gold Ltd. (NYSE:SAND) are the two most active stocks in the Hospitals 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

Companies that can increase earnings at a high compound rate over time are attractive to investors. Analysts expect CYH to grow earnings at a -1.95% annual rate over the next 5 years.

Cash Flow

Cash is king when it comes to investing. CYH’s free cash flow (“FCF”) per share for the trailing twelve months was -1.23. Comparatively, SAND’s free cash flow per share was +0.09. On a percent-of-sales basis, CYH’s free cash flow was -0.93% while SAND converted 0.02% of its revenues into cash flow. This means that, for a given level of sales, SAND is able to generate more free cash flow for investors.

Valuation

CYH trades at a P/S of 0.03, compared to a forward P/E of 46.88, a P/B of 1.12, and a P/S of 9.63 for SAND. CYH 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

When investing it’s crucial to distinguish between price and value. As Warren Buffet said, “price is what you pay, value is what you get”. CYH is currently priced at a -14.89% to its one-year price target of 3.76. Comparatively, SAND is -36.87% relative to its price target of 5.94. This suggests that SAND is the better investment over the next year.

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. CYH has a short ratio of 12.59 compared to a short interest of 2.00 for SAND. This implies that the market is currently less bearish on the outlook for SAND.

Summary

Sandstorm Gold Ltd. (NYSE:SAND) beats Community Health Systems, Inc. (NYSE:CYH) on a total of 9 of the 14 factors compared between the two stocks. SAND higher liquidity, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate and has lower financial risk. In terms of valuation, CYH is the cheaper of the two stocks on an earnings, book value and sales basis, SAND is more undervalued relative to its price target. Finally, SAND has better sentiment signals based on short interest.

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