The shares of Ciena Corporation have increased by more than 65.65% this year alone. The shares recently went down by -0.17% or -$0.06 and now trades at $34.67. The shares of Platform Specialty Products Corporation (NYSE:PAH), has jumped by 13.51% year to date as of 11/08/2018. The shares currently trade at $11.26 and have been able to report a change of 3.02% over the past one week.
The stock of Ciena Corporation and Platform Specialty Products Corporation 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.Next 5Y EPS Growth: 15.00% versus 12.10%
When a company is able to grow consistently in terms of earnings at a high compound rate have the highest likelihood of creating value for its shareholders over time. Analysts have predicted that CIEN will grow it’s earning at a 15.00% annual rate in the next 5 years. This is in contrast to PAH which will have a positive growth at a 12.10% annual rate. This means that the higher growth rate of CIEN implies a greater potential for capital appreciation over the years.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. CIEN has an EBITDA margin of 9.4%, this implies that the underlying business of PAH is more profitable. The ROI of CIEN is 41.80% while that of PAH is 2.00%. These figures suggest that CIEN ventures generate a higher ROI than that of PAH.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, CIEN’s free cash flow per share is a positive 2.24, while that of PAH is positive 1.83.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 CIEN is 2.00 and that of PAH is 2.20. This implies that it is easier for CIEN to cover its immediate obligations over the next 12 months than PAH. The debt ratio of CIEN is 0.53 compared to 0.00 for PAH. CIEN can be able to settle its long-term debts and thus is a lower financial risk than PAH.Valuation
CIEN currently trades at a forward P/E of 19.15, a P/B of 2.79, and a P/S of 1.69 while PAH trades at a forward P/E of 14.00, a P/B of 1.59, and a P/S of 0.82. This means that looking at the earnings, book values and sales basis, PAH 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 CIEN is currently at a 1.23% to its one-year price target of 34.25. Looking at its rival pricing, PAH is at a -23.24% relative to its price target of 14.67.
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), CIEN is given a 2.00 while 2.30 placed for PAH. This means that analysts are more bullish on the outlook for PAH 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 CIEN is 5.06 while that of PAH is just 6.46. This means that analysts are more bullish on the forecast for CIEN stock.
The stock of Ciena Corporation defeats that of Platform Specialty Products Corporation when the two are compared, with CIEN taking 7 out of the total factors that were been considered. CIEN 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, CIEN is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for CIEN is better on when it is viewed on short interest.