Finance

LendingClub Corporation (LC) vs. Pretium Resources Inc. (PVG): Which is the Better Investment?

LendingClub Corporation (NYSE:LC) shares are down more than -17.92% this year and recently decreased -2.31% or -$0.08 to settle at $3.39. Pretium Resources Inc. (NYSE:PVG), on the other hand, is down -35.06% year to date as of 09/11/2018. It currently trades at $7.41 and has returned -7.38% during the past week.

LendingClub Corporation (NYSE:LC) and Pretium Resources Inc. (NYSE:PVG) are the two most active stocks in the Credit Services 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

Companies that can increase earnings at a high compound rate over time are attractive to investors. Analysts expect LC to grow earnings at a -8.60% annual rate over the next 5 years.

Cash Flow

Cash is king when it comes to investing. LC’s free cash flow (“FCF”) per share for the trailing twelve months was -0.56. Comparatively, PVG’s free cash flow per share was +0.50. On a percent-of-sales basis, LC’s free cash flow was -20.14% while PVG converted 0.05% of its revenues into cash flow. This means that, for a given level of sales, PVG is able to generate more free cash flow for investors.

Valuation

LC trades at a forward P/E of 17.84, a P/B of 1.64, and a P/S of 1.30, compared to a forward P/E of 14.82, a P/B of 1.54, and a P/S of 3.27 for PVG. LC 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

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. LC is currently priced at a -32.74% to its one-year price target of 5.04. Comparatively, PVG is -45.75% relative to its price target of 13.66. This suggests that PVG is the better investment over the next year.

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. LC has a short ratio of 5.96 compared to a short interest of 7.18 for PVG. This implies that the market is currently less bearish on the outlook for LC.

Summary

Pretium Resources Inc. (NYSE:PVG) beats LendingClub Corporation (NYSE:LC) on a total of 10 of the 14 factors compared between the two stocks. PVG higher liquidity, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate and has lower financial risk. In terms of valuation, PVG is the cheaper of the two stocks on an earnings and book value, PVG is more undervalued relative to its price target. Finally, CHS has better sentiment signals based on short interest.

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