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Critical Comparison: McEwen Mining Inc. (MUX) vs. First BanCorp. (FBP)

McEwen Mining Inc. (NYSE:MUX) shares are down more than -14.04% this year and recently increased 0.51% or $0.01 to settle at $1.96. First BanCorp. (NYSE:FBP), on the other hand, is up 68.04% year to date as of 09/11/2018. It currently trades at $8.57 and has returned -1.72% during the past week.

McEwen Mining Inc. (NYSE:MUX) and First BanCorp. (NYSE:FBP) are the two most active stocks in the Gold 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

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, FBP is expected to grow at a 40.90% annual rate. All else equal, FBP’s higher growth rate would imply a greater potential for capital appreciation.

Profitability and Returns

A high growth rate isn’t necessarily valuable to investors. In fact, companies that overinvest in low return projects just to achieve a high growth rate can actually destroy shareholder value. Profitability and returns are a measure of the quality of a company’s business and its growth opportunities. We’ll use EBITDA margin and Return on Investment (ROI) to measure this. EBITDA margin of 48.09% for First BanCorp. (FBP). MUX’s ROI is 3.30% while FBP has a ROI of 17.30%. The interpretation is that FBP’s business generates a higher return on investment than MUX’s.

Cash Flow



Cash is king when it comes to investing. MUX’s free cash flow (“FCF”) per share for the trailing twelve months was -0.06. Comparatively, FBP’s free cash flow per share was +0.25. On a percent-of-sales basis, MUX’s free cash flow was -0.03% while FBP converted 0.01% of its revenues into cash flow. This means that, for a given level of sales, FBP is able to generate more free cash flow for investors.

Liquidity and Financial Risk

MUX’s debt-to-equity ratio is 0.00 versus a D/E of 0.10 for FBP. FBP is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

MUX trades at a forward P/E of 59.39, a P/B of 1.30, and a P/S of 5.84, compared to a forward P/E of 13.35, a P/B of 0.99, and a P/S of 3.10 for FBP. MUX is the expensive 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”. MUX is currently priced at a -43.35% to its one-year price target of 3.46. Comparatively, FBP is -10.17% relative to its price target of 9.54. This suggests that MUX is the better investment over the next year.

Risk and Volatility

Analyst use beta to measure a stock’s volatility relative to the overall market. Stocks with a beta above 1 tend to have bigger swings in price than the market as a whole, the opposite being the case for stocks with a beta below 1. MUX has a beta of -1.19 and FBP’s beta is 1.92. MUX’s shares are therefore the less volatile of the two stocks.

Insider Activity and Investor Sentiment

The analysis of insider buying and selling trends can be extended to the aggregate level. Short interest, which represents the percentage of a stock’s tradable shares currently being shorted, captures what the market as a whole feels about a stock. MUX has a short ratio of 25.12 compared to a short interest of 2.39 for FBP. This implies that the market is currently less bearish on the outlook for FBP.

Summary




First BanCorp. (NYSE:FBP) beats McEwen Mining Inc. (NYSE:MUX) on a total of 10 of the 14 factors compared between the two stocks. FBP higher liquidity, is more profitable, generates a higher return on investment, has higher cash flow per share and has a higher cash conversion rate. In terms of valuation, FBP is the cheaper of the two stocks on an earnings, book value and sales basis, Finally, FBP has better sentiment signals based on short interest.

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