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Brinker International, Inc. (EAT) vs. MobileIron, Inc. (MOBL): Breaking Down the Two Hottest Stocks

Brinker International, Inc. (NYSE:EAT) shares are up more than 19.28% this year and recently increased 0.72% or $0.33 to settle at $46.33. MobileIron, Inc. (NASDAQ:MOBL), on the other hand, is up 42.31% year to date as of 09/11/2018. It currently trades at $5.55 and has returned 14.43% during the past week.

Brinker International, Inc. (NYSE:EAT) and MobileIron, Inc. (NASDAQ:MOBL) are the two most active stocks in the Restaurants industry based on today’s trading volumes. The market is clearly enthusiastic about both these stocks, but which is the better investment? To answer this, we will compare the two companies based on the strength of their growth, profitability, risk, returns, valuation, analyst recommendations, and insider trends.

Growth

Companies that can increase earnings at a high compound rate over time are attractive to investors. Analysts expect EAT to grow earnings at a 7.83% annual rate over the next 5 years.

Profitability and Returns

Growth isn’t very attractive to investors if companies are sacrificing profitability and shareholder returns to achieve that growth. We will use EBITDA margin and Return on Investment (ROI), which control for differences in capital structure between the two companies, to measure profitability and return. Brinker International, Inc. (EAT) has an EBITDA margin of 12.14%. This suggests that EAT underlying business is more profitable EAT’s ROI is 24.80% while MOBL has a ROI of -96.10%. The interpretation is that EAT’s business generates a higher return on investment than MOBL’s.

Cash Flow



Earnings don’t always accurately reflect the amount of cash that a company brings in. EAT’s free cash flow (“FCF”) per share for the trailing twelve months was -0.04. Comparatively, MOBL’s free cash flow per share was -0.03. On a percent-of-sales basis, EAT’s free cash flow was -0.05% while MOBL converted -0% of its revenues into cash flow. This means that, for a given level of sales, MOBL is able to generate more free cash flow for investors.

Liquidity and Financial Risk

Analysts look at liquidity and leverage ratios to assess how easily a company can cover its liabilities. EAT has a current ratio of 0.40 compared to 1.50 for MOBL. This means that MOBL can more easily cover its most immediate liabilities over the next twelve months.

Valuation

EAT trades at a forward P/E of 11.70, and a P/S of 0.63, compared to a forward P/E of 1387.50, a P/B of 10.47, and a P/S of 3.11 for MOBL. EAT 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”. EAT is currently priced at a 0.72% to its one-year price target of 46.00. Comparatively, MOBL is -3.48% relative to its price target of 5.75. This suggests that MOBL is the better investment over the next year.

Risk and Volatility

No discussion on value is complete without taking into account risk. Analysts use a stock’s beta, which measures the volatility of a stock compared to the overall market, to measure systematic risk. A stock with a beta above 1 is more volatile than the market. Conversely, a beta below 1 implies a below average level of risk. EAT has a beta of -0.05 and MOBL’s beta is 2.28. EAT’s shares are therefore the less volatile of the two stocks.

Insider Activity and Investor Sentiment




Comparing the number of shares sold short to the float is a method analysts often use to get a reading on investor sentiment. EAT has a short ratio of 12.28 compared to a short interest of 4.54 for MOBL. This implies that the market is currently less bearish on the outlook for MOBL.

Summary

MobileIron, Inc. (NASDAQ:MOBL) beats Brinker International, Inc. (NYSE:EAT) on a total of 7 of the 14 factors compared between the two stocks. MOBL is growing fastly, has a higher cash conversion rate, higher liquidity and has lower financial risk. In terms of valuation, EAT is the cheaper of the two stocks on an earnings, book value and sales basis, MOBL is more undervalued relative to its price target. Finally, MOBL has better sentiment signals based on short interest.

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