LM Funding America, Inc. (NASDAQ:LMFA) shares are down more than -66.46% this year and recently increased 17.88% or $0.08 to settle at $0.53. Grupo Supervielle S.A. (NYSE:SUPV), on the other hand, is down -74.90% year to date as of 09/11/2018. It currently trades at $7.36 and has returned 16.64% during the past week.
LM Funding America, Inc. (NASDAQ:LMFA) and Grupo Supervielle S.A. (NYSE:SUPV) are the two most active stocks in the Credit Services industry based on today’s trading volumes. Investor interest in the two stocks is clearly very high, but which is the better investment? To answer this question, we will compare the two companies across growth, profitability, risk, and valuation metrics, and also examine their analyst ratings and insider activity trends.Growth
The ability to grow earnings at a compound rate over time is a crucial determinant of investment value. Comparatively, SUPV is expected to grow at a 1.20% annual rate. All else equal, SUPV’s higher growth rate would imply a greater 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. LMFA’s ROI is -890.30% while SUPV has a ROI of 34.20%. The interpretation is that SUPV’s business generates a higher return on investment than LMFA’s.Cash Flow
Earnings don’t always accurately reflect the amount of cash that a company brings in. On a percent-of-sales basis, LMFA’s free cash flow was 0% while SUPV converted -36.27% of its revenues into cash flow. This means that, for a given level of sales, LMFA is able to generate more free cash flow for investors.Financial Risk
LMFA’s debt-to-equity ratio is 0.27 versus a D/E of 0.59 for SUPV. SUPV is therefore the more solvent of the two companies, and has lower financial risk.
LMFA trades at a P/B of 2.21, and a P/S of 0.82, compared to a forward P/E of 5.04, a P/B of 1.64, and a P/S of 1.09 for SUPV. 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
When investing it’s crucial to distinguish between price and value. As Warren Buffet said, “price is what you pay, value is what you get”.
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. LMFA has a short ratio of 1.48 compared to a short interest of 0.44 for SUPV. This implies that the market is currently less bearish on the outlook for SUPV.Summary
LM Funding America, Inc. (NASDAQ:LMFA) beats Grupo Supervielle S.A. (NYSE:SUPV) on a total of 7 of the 13 factors compared between the two stocks. LMFA has higher cash flow per share, has a higher cash conversion rate, higher liquidity and has lower financial risk. In terms of valuation, LMFA is the cheaper of the two stocks on an earnings and sales basis, Finally, MNGA has better sentiment signals based on short interest.