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Dissecting the Numbers for India Globalization Capital, Inc. (IGC) and ADOMANI, Inc. (ADOM)

India Globalization Capital, Inc. (NYSE:IGC) shares are up more than 19.00% this year and recently decreased -4.03% or -$0.05 to settle at $1.19. ADOMANI, Inc. (NASDAQ:ADOM), on the other hand, is down -85.91% year to date as of 09/11/2018. It currently trades at $0.62 and has returned -4.17% during the past week.

India Globalization Capital, Inc. (NYSE:IGC) and ADOMANI, Inc. (NASDAQ:ADOM) are the two most active stocks in the Steel & Iron 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.

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 Return on Investment (ROI) as measures of profitability and return. IGC’s ROI is -17.40% while ADOM has a ROI of -490.90%. The interpretation is that IGC’s business generates a higher return on investment than ADOM’s.

Cash Flow

The amount of free cash flow available to investors is ultimately what determines the value of a stock. IGC’s free cash flow (“FCF”) per share for the trailing twelve months was -0.02. Comparatively, ADOM’s free cash flow per share was -0.03. On a percent-of-sales basis, IGC’s free cash flow was -0.03% while ADOM converted -0.51% of its revenues into cash flow. This means that, for a given level of sales, IGC is able to generate more free cash flow for investors.

Liquidity and Financial Risk



Liquidity and leverage ratios provide insight into the financial health of a company, and allow investors to determine the likelihood that the company will be able to continue operating as a going concern. IGC has a current ratio of 1.10 compared to 3.90 for ADOM. This means that ADOM can more easily cover its most immediate liabilities over the next twelve months. IGC’s debt-to-equity ratio is 0.26 versus a D/E of 0.19 for ADOM. IGC is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

IGC trades at a P/B of 4.96, and a P/S of 11.69, compared to a P/B of 4.77, and a P/S of 30.52 for ADOM. IGC is the cheaper of the two stocks on sales basis but is expensive in terms of P/E and P/B 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

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.

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. IGC has a short ratio of 0.08 compared to a short interest of 0.99 for ADOM. This implies that the market is currently less bearish on the outlook for IGC.

Summary

India Globalization Capital, Inc. (NYSE:IGC) beats ADOMANI, Inc. (NASDAQ:ADOM) on a total of 6 of the 13 factors compared between the two stocks. IGC generates a higher return on investment, has higher cash flow per share and has a higher cash conversion rate. Finally, IGC has better sentiment signals based on short interest.

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