Sanchez Energy Corporation (NYSE:SN), on the other hand, is down -52.17% year to date as of 09/11/2018. It currently trades at $2.54 and has returned -3.79% during the past week.
Pitney Bowes Inc. (NYSE:PBI) and Sanchez Energy Corporation (NYSE:SN) are the two most active stocks in the Business Equipment industry based on today’s trading volumes. We will compare the two companies based on the strength of various metrics, including growth, profitability, risk, return, and valuation to determine if one is a better investment than the other.Growth
The ability to consistently grow earnings at a high compound rate is a defining characteristic of the best companies for long-term investment. Analysts expect PBI to grow earnings at a 4.00% annual rate over the next 5 years.Profitability and Returns
Growth in and of itself is not necessarily valuable, and it can even be harmful to shareholders if companies overinvest in unprofitable projects in pursuit of that growth. We will use EBITDA margin and Return on Investment (ROI), which adjust for differences in capital structure, as measure of profitability and return. , compared to an EBITDA margin of 33.84% for Sanchez Energy Corporation (SN). PBI’s ROI is 8.30% while SN has a ROI of -8.90%. The interpretation is that PBI’s business generates a higher return on investment than SN’s.Cash Flow
Earnings don’t always accurately reflect the amount of cash that a company brings in. PBI’s free cash flow (“FCF”) per share for the trailing twelve months was +0.00. Comparatively, SN’s free cash flow per share was -1.33. On a percent-of-sales basis, PBI’s free cash flow was 0% while SN converted -0.02% of its revenues into cash flow. This means that, for a given level of sales, PBI 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. PBI has a current ratio of 1.20 compared to 1.10 for SN. This means that PBI can more easily cover its most immediate liabilities over the next twelve months.Valuation
PBI trades at a forward P/E of 5.63, a P/B of 6.83, and a P/S of 0.37, compared to a forward P/E of 3.88, and a P/S of 0.25 for SN. PBI 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
Just because a stock is cheaper doesn’t mean there’s more value to be had. In order to assess value we need to compare the current price to where it’s likely to trade in the future. PBI is currently priced at a -39.83% to its one-year price target of 11.80. Comparatively, SN is -19.37% relative to its price target of 3.15. This suggests that PBI 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. PBI has a beta of 0.95 and SN’s beta is 1.68. PBI’s shares are therefore the less volatile of the two stocks.Insider Activity and Investor Sentiment
Short interest is another tool that analysts use to gauge investor sentiment. It represents the percentage of a stock’s tradable shares that are being shorted. PBI has a short ratio of 5.07 compared to a short interest of 8.12 for SN. This implies that the market is currently less bearish on the outlook for PBI.Summary
Pitney Bowes Inc. (NYSE:PBI) beats Sanchez Energy Corporation (NYSE:SN) on a total of 9 of the 14 factors compared between the two stocks. PBI is growing fastly, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate and higher liquidity. PBI is more undervalued relative to its price target. Finally, PBI has better sentiment signals based on short interest.