Tellurian Inc. (NASDAQ:TELL) shares are down more than -11.91% this year and recently increased 5.80% or $0.47 to settle at $8.58. Globalstar, Inc. (NYSE:GSAT), on the other hand, is down -61.68% year to date as of 09/11/2018. It currently trades at $0.50 and has returned 0.34% during the past week.
Tellurian Inc. (NASDAQ:TELL) and Globalstar, Inc. (NYSE:GSAT) are the two most active stocks in the Oil & Gas Drilling & Exploration 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
The ability to consistently grow earnings at a high compound rate is a defining characteristic of the best companies for long-term investment. Comparatively, GSAT is expected to grow at a 15.00% annual rate. All else equal, GSAT’s higher growth rate would imply a greater potential for capital appreciation.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. EBITDA margin of 134.58% for Globalstar, Inc. (GSAT). TELL’s ROI is -106.60% while GSAT has a ROI of -40.40%. The interpretation is that GSAT’s business generates a higher return on investment than TELL’s.Cash Flow
The value of a stock is simply the present value of its future free cash flows. On a percent-of-sales basis, TELL’s free cash flow was 0% while GSAT converted -0.01% of its revenues into cash flow. This means that, for a given level of sales, TELL is able to generate more free cash flow for investors.Liquidity and Financial Risk
Liquidity and leverage ratios provide insight into the financial health of a company, and allow investors to determine the likelihood that the company will be able to continue operating as a going concern. TELL has a current ratio of 7.30 compared to 0.70 for GSAT. This means that TELL can more easily cover its most immediate liabilities over the next twelve months. TELL’s debt-to-equity ratio is 0.00 versus a D/E of 1.28 for GSAT. GSAT is therefore the more solvent of the two companies, and has lower financial risk.Valuation
TELL trades at a P/B of 5.14, and a P/S of 152.09, compared to a P/B of 1.67, and a P/S of 4.95 for GSAT. 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. TELL is currently priced at a -34% to its one-year price target of 13.00.
Risk and Volatility
Beta is an important measure that gives investors a sense of the market risk associated with a particular stock. A beta above 1 signals above average market risk, while a beta below 1 implies below average volatility. TELL has a beta of 1.62 and GSAT’s beta is 1.56. GSAT’s shares are therefore the less volatile of the two stocks.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. TELL has a short ratio of 8.98 compared to a short interest of 14.63 for GSAT. This implies that the market is currently less bearish on the outlook for TELL.Summary
Globalstar, Inc. (NYSE:GSAT) beats Tellurian Inc. (NASDAQ:TELL) on a total of 6 of the 13 factors compared between the two stocks. GSAT has higher cash flow per share, is more profitable and generates a higher return on investment. In terms of valuation, GSAT is the cheaper of the two stocks on book value and sales basis, Finally, HCLP has better sentiment signals based on short interest.