Alamos Gold Inc. (NYSE:AGI) shares are down more than -35.48% this year and recently increased 0.96% or $0.04 to settle at $4.20. Eros International Plc (NYSE:EROS), on the other hand, is up 37.31% year to date as of 09/11/2018. It currently trades at $13.25 and has returned 17.78% during the past week.
Alamos Gold Inc. (NYSE:AGI) and Eros International Plc (NYSE:EROS) are the two most active stocks in the Gold industry based on today’s trading volumes. Investor interest in the two stocks is clearly very high, but which is the better investment? To answer this question, we will compare the two companies across growth, profitability, risk, and valuation metrics, and also examine their analyst ratings and insider activity trends.Growth
One of the key things investors look for in a company is the ability to grow earnings at a high compound rate over time. Comparatively, EROS is expected to grow at a 15.00% annual rate. All else equal, EROS’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. Alamos Gold Inc. (AGI) has an EBITDA margin of 19.83%. This suggests that AGI underlying business is more profitableCash Flow
Cash is king when it comes to investing. AGI’s free cash flow (“FCF”) per share for the trailing twelve months was +0.02. Comparatively, EROS’s free cash flow per share was +0.23. On a percent-of-sales basis, AGI’s free cash flow was 0% while EROS converted 0% of its revenues into cash flow. This means that, for a given level of sales, AGI is able to generate more free cash flow for investors.Valuation
AGI trades at a forward P/E of 13.55, a P/B of 0.61, and a P/S of 2.59, compared to a forward P/E of 39.20, a P/B of 1.04, and a P/S of 3.22 for EROS. AGI 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
Investors often compare a stock’s current price to an analyst price target to get a sense of the potential upside within the next year. AGI is currently priced at a -52.38% to its one-year price target of 8.82. Comparatively, EROS is -27.4% relative to its price target of 18.25. This suggests that AGI 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. AGI has a short ratio of 3.46 compared to a short interest of 27.23 for EROS. This implies that the market is currently less bearish on the outlook for AGI.Summary
Alamos Gold Inc. (NYSE:AGI) beats Eros International Plc (NYSE:EROS) on a total of 8 of the 14 factors compared between the two stocks. AGI is more profitable and has lower financial risk. In terms of valuation, AGI is the cheaper of the two stocks on an earnings, book value and sales basis, AGI is more undervalued relative to its price target. Finally, AGI has better sentiment signals based on short interest.