U.S. Silica Holdings, Inc. (NYSE:SLCA) shares are down more than -37.75% this year and recently increased 6.01% or $1.15 to settle at $20.27. Sibanye Gold Limited (NYSE:SBGL), on the other hand, is down -49.34% year to date as of 09/11/2018. It currently trades at $2.46 and has returned -0.40% during the past week.
U.S. Silica Holdings, Inc. (NYSE:SLCA) and Sibanye Gold Limited (NYSE:SBGL) are the two most active stocks in the Industrial Metals & Minerals 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.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. U.S. Silica Holdings, Inc. (SLCA) has an EBITDA margin of 19.4%. This suggests that SLCA underlying business is more profitable SLCA’s ROI is 7.40% while SBGL has a ROI of 0.70%. The interpretation is that SLCA’s business generates a higher return on investment than SBGL’s.Cash Flow
The amount of free cash flow available to investors is ultimately what determines the value of a stock. SLCA’s free cash flow (“FCF”) per share for the trailing twelve months was +0.04. Comparatively, SBGL’s free cash flow per share was -. On a percent-of-sales basis, SLCA’s free cash flow was 0.25% while SBGL converted 0% of its revenues into cash flow. This means that, for a given level of sales, SLCA is able to generate more free cash flow for investors.Liquidity and Financial Risk
Balance sheet risk is one of the biggest factors to consider before investing. SLCA has a current ratio of 2.90 compared to 1.80 for SBGL. This means that SLCA can more easily cover its most immediate liabilities over the next twelve months. SLCA’s debt-to-equity ratio is 0.93 versus a D/E of 1.13 for SBGL. SBGL is therefore the more solvent of the two companies, and has lower financial risk.Valuation
SLCA trades at a forward P/E of 7.67, a P/B of 1.16, and a P/S of 1.05, compared to a forward P/E of 6.00, a P/B of 0.84, and a P/S of 0.43 for SBGL. SLCA 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
A cheap stock isn’t a good investment if the stock is priced accurately. To get a sense of “value” we must compare the current price to some measure of intrinsic value such as a price target. SLCA is currently priced at a -39.35% to its one-year price target of 33.42. Comparatively, SBGL is -55.83% relative to its price target of 5.57. This suggests that SBGL 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. SLCA has a beta of 2.18 and SBGL’s beta is 0.01. SBGL’s shares are therefore the less volatile of the two stocks.Insider Activity and Investor Sentiment
Analysts often look at short interest, or the percentage of a company’s float currently being shorted by investors, to aid in their outlook for a particular stock. SLCA has a short ratio of 5.11 compared to a short interest of 4.03 for SBGL. This implies that the market is currently less bearish on the outlook for SBGL.Summary
Sibanye Gold Limited (NYSE:SBGL) beats U.S. Silica Holdings, Inc. (NYSE:SLCA) on a total of 7 of the 14 factors compared between the two stocks. SBGL is more profitable. In terms of valuation, SBGL is the cheaper of the two stocks on an earnings, book value and sales basis, SBGL is more undervalued relative to its price target. Finally, SBGL has better sentiment signals based on short interest.