Earnings

Which of these 2 stocks can turn out to be absolute gem? – Denison Mines Corp. (DNN), Westwater Resources, Inc. (WWR)

The shares of Denison Mines Corp. have increased by more than 10.35% this year alone. The shares recently went down by -8.21% or -$0.05 and now trades at $0.61. The shares of Westwater Resources, Inc. (NASDAQ:WWR), has slumped by -79.57% year to date as of 10/10/2018. The shares currently trade at $0.22 and have been able to report a change of -4.54% over the past one week.

The stock of Denison Mines Corp. and Westwater Resources, Inc. were two of the most active stocks on Wednesday. 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. These figures suggest that WWR ventures generate a higher ROI than that of DNN.

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 DNN is 4.00 and that of WWR is 1.70. This implies that it is easier for DNN to cover its immediate obligations over the next 12 months than WWR. The debt ratio of DNN is 0.00 compared to 0.00 for WWR. WWR can be able to settle its long-term debts and thus is a lower financial risk than DNN.

Valuation



DNN currently trades at a P/B of 2.02, and a P/S of 28.81 while WWR trades at a P/B of 0.31, This means that looking at the earnings, book values and sales basis, DNN 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 DNN is currently at a -43.52% to its one-year price target of 1.08. Looking at its rival pricing, WWR is at a -92.67% relative to its price target of 3.00.

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), DNN is given a 2.30 while 2.00 placed for WWR. This means that analysts are more bullish on the outlook for DNN 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 DNN is 10.28 while that of WWR is just 1.95. This means that analysts are more bullish on the forecast for WWR stock.

Conclusion

The stock of Denison Mines Corp. defeats that of Westwater Resources, Inc. when the two are compared, with DNN taking 1 out of the total factors that were been considered. DNN 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, DNN is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for DNN is better on when it is viewed on short interest.

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