Finance

IAMGOLD Corporation (IAG) vs. TransEnterix, Inc. (TRXC): Breaking Down the Two Hottest Stocks

IAMGOLD Corporation (NYSE:IAG) shares are down more than -36.54% this year and recently increased 0.82% or $0.03 to settle at $3.70. TransEnterix, Inc. (NYSE:TRXC), on the other hand, is up 170.47% year to date as of 09/11/2018. It currently trades at $5.22 and has returned -12.71% during the past week.

IAMGOLD Corporation (NYSE:IAG) and TransEnterix, Inc. (NYSE:TRXC) are the two most active stocks in the Gold industry based on today’s trading volumes. Investors are clearly interested in the two names, but is one a better choice than the other? We will compare the two companies across growth, profitability, risk, valuation, and insider trends to answer this question.

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. Analysts expect IAG to grow earnings at a 3.00% annual rate over the next 5 years.

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 EBITDA margin and Return on Investment (ROI) as measures of profitability and return. IAMGOLD Corporation (IAG) has an EBITDA margin of 1.6%. This suggests that IAG underlying business is more profitable IAG’s ROI is 14.50% while TRXC has a ROI of -30.50%. The interpretation is that IAG’s business generates a higher return on investment than TRXC’s.

Cash Flow



If there’s one thing investors care more about than earnings, it’s cash flow. IAG’s free cash flow (“FCF”) per share for the trailing twelve months was -0.06. Comparatively, TRXC’s free cash flow per share was -0.03. On a percent-of-sales basis, IAG’s free cash flow was -2.55% while TRXC converted -0.09% of its revenues into cash flow. This means that, for a given level of sales, TRXC 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. IAG has a current ratio of 4.70 compared to 7.40 for TRXC. This means that TRXC can more easily cover its most immediate liabilities over the next twelve months. IAG’s debt-to-equity ratio is 0.14 versus a D/E of 0.11 for TRXC. IAG is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

IAG trades at a forward P/E of 20.79, a P/B of 0.61, and a P/S of 1.50, compared to a P/B of 6.44, and a P/S of 77.96 for TRXC. 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. IAG is currently priced at a -51.63% to its one-year price target of 7.65. Comparatively, TRXC is 0.97% relative to its price target of 5.17. This suggests that IAG is the better investment over the next year.

Risk and Volatility

To gauge the market risk of a particular stock, investors use beta. Stocks with a beta above 1 are more volatile than the market as a whole. Conversely, a beta below 1 implies below average systematic risk. IAG has a beta of -0.28 and TRXC’s beta is 2.17. IAG’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. IAG has a short ratio of 1.56 compared to a short interest of 4.60 for TRXC. This implies that the market is currently less bearish on the outlook for IAG.

Summary

IAMGOLD Corporation (NYSE:IAG) beats TransEnterix, Inc. (NYSE:TRXC) on a total of 9 of the 14 factors compared between the two stocks. IAG is growing fastly, is more profitable and generates a higher return on investment. In terms of valuation, IAG is the cheaper of the two stocks on book value and sales basis, IAG is more undervalued relative to its price target. Finally, IAG has better sentiment signals based on short interest.

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