Finance

A Side-by-side Analysis of WMIH Corp. (WMIH) and Gulfport Energy Corporation (GPOR)

WMIH Corp. (NASDAQ:WMIH) shares are up more than 68.41% this year and recently decreased -2.05% or -$0.03 to settle at $1.43. Gulfport Energy Corporation (NASDAQ:GPOR), on the other hand, is down -19.36% year to date as of 09/11/2018. It currently trades at $10.29 and has returned -8.86% during the past week.

WMIH Corp. (NASDAQ:WMIH) and Gulfport Energy Corporation (NASDAQ:GPOR) are the two most active stocks in the Property & Casualty Insurance industry based on today’s trading volumes. To determine if one is a better investment than the other, we will compare the two companies’ growth, profitability, risk, return, and valuation characteristics, as well as their analyst ratings and sentiment signals.

Growth

Companies that can consistently grow earnings at a high compound rate usually have the greatest potential to create value for shareholders in the long-run. Analysts expect WMIH to grow earnings at a 28.87% annual rate over the next 5 years. Comparatively, GPOR is expected to grow at a 8.01% annual rate. All else equal, WMIH’s higher growth rate would imply a greater potential for capital appreciation.

Profitability and Returns

Growth doesn’t mean much if it comes at the cost of weak profitability. To adjust for differences in capital structure we’ll use EBITDA margin and Return on Investment (ROI) as measures of profitability and return. , compared to an EBITDA margin of 77.42% for Gulfport Energy Corporation (GPOR). WMIH’s ROI is -2.70% while GPOR has a ROI of 10.60%. The interpretation is that GPOR’s business generates a higher return on investment than WMIH’s.

Cash Flow



Cash is king when it comes to investing. On a percent-of-sales basis, WMIH’s free cash flow was 0% while GPOR converted -7.09% of its revenues into cash flow. This means that, for a given level of sales, WMIH is able to generate more free cash flow for investors.

Liquidity and Financial Risk

WMIH’s debt-to-equity ratio is 0.00 versus a D/E of 0.66 for GPOR. GPOR is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

WMIH trades at a forward P/E of 5.93, a P/B of 3.40, and a P/S of 166.23, compared to a forward P/E of 7.41, a P/B of 0.56, and a P/S of 1.45 for GPOR. WMIH is the cheaper of the two stocks on an earnings basis but is expensive in terms of P/B and P/S ratio. 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”. WMIH is currently priced at a -13.86% to its one-year price target of 1.66. Comparatively, GPOR is -32.39% relative to its price target of 15.22. This suggests that GPOR is the better investment over the next year.

Risk and Volatility

To gauge the market risk of a particular stock, investors use beta. Stocks with a beta above 1 are more volatile than the market as a whole. Conversely, a beta below 1 implies below average systematic risk. WMIH has a beta of 0.12 and GPOR’s beta is 0.34. WMIH’s shares are therefore the less volatile of the two stocks.

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. WMIH has a short ratio of 5.14 compared to a short interest of 3.35 for GPOR. This implies that the market is currently less bearish on the outlook for GPOR.

Summary




Gulfport Energy Corporation (NASDAQ:GPOR) beats WMIH Corp. (NASDAQ:WMIH) on a total of 7 of the 14 factors compared between the two stocks. GPOR is growing fastly and higher liquidity. In terms of valuation, GPOR is the cheaper of the two stocks on book value and sales basis, GPOR is more undervalued relative to its price target. Finally, GPOR has better sentiment signals based on short interest.

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