Diebold Nixdorf, Incorporated (NYSE:DBD) shares are down more than -76.45% this year and recently decreased -9.62% or -$0.41 to settle at $3.85. BioPharmX Corporation (NYSE:BPMX), on the other hand, is up 67.88% year to date as of 10/11/2018. It currently trades at $0.19 and has returned -2.79% during the past week.
Diebold Nixdorf, Incorporated (NYSE:DBD) and BioPharmX Corporation (NYSE:BPMX) are the two most active stocks in the Diversified Computer Systems 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
Companies that can consistently grow earnings at a high compound rate usually have the greatest potential to create value for shareholders in the long-run. Analysts expect DBD to grow earnings at a 7.00% annual rate over the next 5 years.Profitability and Returns
A high growth rate isn’t necessarily valuable to investors. In fact, companies that overinvest in low return projects just to achieve a high growth rate can actually destroy shareholder value. Profitability and returns are a measure of the quality of a company’s business and its growth opportunities. We’ll use EBITDA margin and Return on Investment (ROI) to measure this. Diebold Nixdorf, Incorporated (DBD) has an EBITDA margin of 2.8%. This suggests that DBD underlying business is more profitableCash Flow
Earnings don’t always accurately reflect the amount of cash that a company brings in. DBD’s free cash flow (“FCF”) per share for the trailing twelve months was -1.64. Comparatively, BPMX’s free cash flow per share was -0.02. On a percent-of-sales basis, DBD’s free cash flow was -2.71% while BPMX converted -5.41% of its revenues into cash flow. This means that, for a given level of sales, DBD is able to generate more free cash flow for investors.Liquidity and Financial Risk
Liquidity and leverage ratios measure a company’s ability to meet short-term obligations and longer-term debts. DBD has a current ratio of 1.40 compared to 2.40 for BPMX. This means that BPMX can more easily cover its most immediate liabilities over the next twelve months. DBD’s debt-to-equity ratio is 8.30 versus a D/E of 0.00 for BPMX. DBD is therefore the more solvent of the two companies, and has lower financial risk.Valuation
DBD trades at a forward P/E of 23.62, a P/B of 1.29, and a P/S of 0.06, compared to a P/B of 9.25, and a P/S of 497.50 for BPMX. 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
A cheap stock is not necessarily a value stock. Most of the time, a stock is cheap for good reason. A stock only has value if the current price is substantially below the price at which it should trade in the future. DBD is currently priced at a -63.61% to its one-year price target of 10.58. Comparatively, BPMX is -81.9% relative to its price target of 1.05. This suggests that BPMX is the better investment over the next year.
Risk and Volatility
No discussion on value is complete without taking into account risk. Analysts use a stock’s beta, which measures the volatility of a stock compared to the overall market, to measure systematic risk. A stock with a beta above 1 is more volatile than the market. Conversely, a beta below 1 implies a below average level of risk. DBD has a beta of 1.73 and BPMX’s beta is -0.66. BPMX’s shares are therefore the less volatile of the two stocks.Insider Activity and Investor Sentiment
The analysis of insider buying and selling trends can be extended to the aggregate level. Short interest, which represents the percentage of a stock’s tradable shares currently being shorted, captures what the market as a whole feels about a stock. DBD has a short ratio of 7.48 compared to a short interest of 1.95 for BPMX. This implies that the market is currently less bearish on the outlook for BPMX.Summary
BioPharmX Corporation (NYSE:BPMX) beats Diebold Nixdorf, Incorporated (NYSE:DBD) on a total of 9 of the 14 factors compared between the two stocks. BPMX is growing fastly, has higher cash flow per share, higher liquidity and has lower financial risk. BPMX is more undervalued relative to its price target. Finally, BPMX has better sentiment signals based on short interest.