Earnings

Set Sail With Fossil Group, Inc. (FOSL), Shopify Inc. (SHOP)

The shares of Fossil Group, Inc. have increased by more than 216.73% this year alone. The shares recently went up by 1.65% or $0.4 and now trades at $24.61. The shares of Shopify Inc. (NYSE:SHOP), has jumped by 53.96% year to date as of 09/13/2018. The shares currently trade at $155.50 and have been able to report a change of 15.93% over the past one week.

The stock of Fossil Group, Inc. and Shopify Inc. were two of the most active stocks on Thursday. Investors seem to be very interested in what happens to the stocks of these two companies but do investors favor one over the other? We will analyze the growth, profitability, risk, valuation, and insider trends of both companies and see which one investors prefer.

Profitability and Returns

Growth alone cannot be used to see if the company will be valuable. Shareholders will be the losers if a company invest in ventures that aren’t profitable enough to support upbeat growth. In order for us to accurately measure profitability and return, we will be using the EBITDA margin and Return on Investment (ROI), which balances the difference in capital structure. FOSL has an EBITDA margin of 3.52%, this implies that the underlying business of FOSL is more profitable. The ROI of FOSL is -46.40% while that of SHOP is -4.80%. These figures suggest that SHOP ventures generate a higher ROI than that of FOSL.

Cash Flow

The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, FOSL’s free cash flow per share is a positive 2.85.

Liquidity and Financial Risk



The ability of a company to meet up with its short-term obligations and be able to clear its longer-term debts is measured using Liquidity and leverage ratios. The current ratio for FOSL is 2.10 and that of SHOP is 12.90. This implies that it is easier for FOSL to cover its immediate obligations over the next 12 months than SHOP. The debt ratio of FOSL is 0.77 compared to 0.01 for SHOP. FOSL can be able to settle its long-term debts and thus is a lower financial risk than SHOP.

Valuation

FOSL currently trades at a forward P/E of 39.44, a P/B of 2.35, and a P/S of 0.43 while SHOP trades at a forward P/E of 262.23, a P/B of 9.95, and a P/S of 18.49. This means that looking at the earnings, book values and sales basis, FOSL is the cheaper one. It is very obvious that earnings are the most important factors to investors, thus analysts are most likely to place their bet on the P/E.

Analyst Price Targets and Opinions

The mistake some people make is that they think a cheap stock has more value to it. In order to know the value of a stock, there is need to compare its current price to its likely trading price in the future. The price of FOSL is currently at a 19.47% to its one-year price target of 20.60. Looking at its rival pricing, SHOP is at a -1.98% relative to its price target of 158.64.




When looking at the investment recommendation on say a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell), FOSL is given a 3.30 while 2.20 placed for SHOP. This means that analysts are more bullish on the outlook for FOSL stocks.

Insider Activity and Investor Sentiment

Short interest or otherwise called the percentage of a stock’s tradable shares currently being shorted is another data that investors use to get a handle on sentiment. The short ratio for FOSL is 6.83 while that of SHOP is just 8.12. This means that analysts are more bullish on the forecast for FOSL stock.

Conclusion

The stock of Shopify Inc. defeats that of Fossil Group, Inc. when the two are compared, with SHOP taking 5 out of the total factors that were been considered. SHOP happens to be more profitable, generates a higher ROI, has higher cash flow per share, higher liquidity and has a lower financial risk. When looking at the stock valuation, SHOP is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for SHOP is better on when it is viewed on short interest.

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