Finance

Infinera Corporation (INFN) vs. XpresSpa Group, Inc. (XSPA): Comparing the Most Active Stocks

Infinera Corporation (NASDAQ:INFN) shares are up more than 17.06% this year and recently decreased -0.13% or -$0.01 to settle at $7.41. XpresSpa Group, Inc. (NASDAQ:XSPA), on the other hand, is down -86.86% year to date as of 09/11/2018. It currently trades at $0.18 and has returned 12.50% during the past week.

Infinera Corporation (NASDAQ:INFN) and XpresSpa Group, Inc. (NASDAQ:XSPA) are the two most active stocks in the Communication Equipment industry based on today’s trading volumes. The market is clearly enthusiastic about both these stocks, but which is the better investment? To answer this, we will compare the two companies based on the strength of their growth, profitability, risk, returns, valuation, analyst recommendations, and insider trends.

Growth

The ability to grow earnings at a compound rate over time is a crucial determinant of investment value. Analysts expect INFN to grow earnings at a 20.00% annual rate over the next 5 years. Comparatively, XSPA is expected to grow at a 20.00% annual rate. All else equal, All else equal, the two stocks’ identical expected growth rates would imply a similar potential for capital appreciation..

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. INFN’s ROI is -22.40% while XSPA has a ROI of 19.60%. The interpretation is that XSPA’s business generates a higher return on investment than INFN’s.

Cash Flow



The value of a stock is simply the present value of its future free cash flows. INFN’s free cash flow (“FCF”) per share for the trailing twelve months was -0.04. Comparatively, XSPA’s free cash flow per share was -0.08. On a percent-of-sales basis, INFN’s free cash flow was -0% while XSPA converted -0% of its revenues into cash flow. This means that, for a given level of sales, INFN is able to generate more free cash flow for investors.

Liquidity and Financial Risk

Liquidity and leverage ratios are important because they reveal the financial health of a company. INFN has a current ratio of 2.20 compared to 0.60 for XSPA. This means that INFN can more easily cover its most immediate liabilities over the next twelve months. INFN’s debt-to-equity ratio is 0.00 versus a D/E of 0.63 for XSPA. XSPA is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

INFN trades at a forward P/E of 33.53, a P/B of 1.77, and a P/S of 1.49, compared to a P/B of 0.35, and a P/S of 0.11 for XSPA. INFN 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. INFN is currently priced at a -33.24% to its one-year price target of 11.10.

Risk and Volatility

Beta is a metric that investors frequently use to analyze a stock’s systematic risk. A beta above 1 implies above average market volatility. Conversely, a stock with a beta below 1 is seen as less risky than the overall market. INFN has a beta of 0.11 and XSPA’s beta is -0.79. XSPA’s shares are therefore the less volatile of the two stocks.

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. INFN has a short ratio of 6.52 compared to a short interest of 2.12 for XSPA. This implies that the market is currently less bearish on the outlook for XSPA.

Summary

XpresSpa Group, Inc. (NASDAQ:XSPA) beats Infinera Corporation (NASDAQ:INFN) on a total of 7 of the 13 factors compared between the two stocks. XSPA has higher cash flow per share. In terms of valuation, XSPA is the cheaper of the two stocks on an earnings, book value and sales basis, Finally, XSPA has better sentiment signals based on short interest.

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