U.S. Silica Holdings, Inc. (NYSE:SLCA) shares are down more than -56.39% this year and recently increased 0.07% or $0.01 to settle at $14.20. Cinemark Holdings, Inc. (NYSE:CNK), on the other hand, is up 9.62% year to date as of 12/03/2018. It currently trades at $38.17 and has returned 0.74% during the past week.
U.S. Silica Holdings, Inc. (NYSE:SLCA) and Cinemark Holdings, Inc. (NYSE:CNK) are the two most active stocks based on recent trading volumes. To determine if one is a better investment than the other, we will compare the two companies’ growth, profitability, risk, return, and valuation characteristics, as well as their analyst ratings and sentiment signals.Growth
The ability to grow earnings at a compound rate over time is a crucial determinant of investment value. Comparatively, CNK is expected to grow at a 15.00% annual rate. All else equal, CNK’s higher growth rate would imply a greater potential for capital appreciation.Profitability and Returns
Growth isn’t very attractive to investors if companies are sacrificing profitability and shareholder returns to achieve that growth. We will use EBITDA margin and Return on Investment (ROI), which control for differences in capital structure between the two companies, to measure profitability and return., compared to an EBITDA margin of 19.73% for Cinemark Holdings, Inc. (CNK). SLCA’s ROI is 7.40% while CNK has a ROI of 7.70%. The interpretation is that CNK’s business generates a higher return on investment than SLCA’s.Cash Flow
Cash is king when it comes to investing. SLCA’s free cash flow (“FCF”) per share for the trailing twelve months was +0.36. Comparatively, CNK’s free cash flow per share was -0.44. On a percent-of-sales basis, SLCA’s free cash flow was 2.25% while CNK converted -1.72% of its revenues into cash flow. This means that, for a given level of sales, SLCA is able to generate more free cash flow for investors.Liquidity and Financial Risk
Balance sheet risk is one of the biggest factors to consider before investing. SLCA has a current ratio of 2.80 compared to 1.20 for CNK. This means that SLCA can more easily cover its most immediate liabilities over the next twelve months. SLCA’s debt-to-equity ratio is 0.93 versus a D/E of 1.40 for CNK. CNK is therefore the more solvent of the two companies, and has lower financial risk.Valuation
SLCA trades at a forward P/E of 22.90, a P/B of 0.80, and a P/S of 0.72, compared to a forward P/E of 16.23, a P/B of 3.04, and a P/S of 1.43 for CNK. 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
Investors often compare a stock’s current price to an analyst price target to get a sense of the potential upside within the next year. SLCA is currently priced at a -26.5% to its one-year price target of 19.32. Comparatively, CNK is -13.58% relative to its price target of 44.17. This suggests that SLCA is the better investment over the next year.
Risk and Volatility
Beta is a metric that investors frequently use to analyze a stock’s systematic risk. A beta above 1 implies above average market volatility. Conversely, a stock with a beta below 1 is seen as less risky than the overall market. SLCA has a beta of 2.11 and CNK’s beta is 0.80. CNK’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. SLCA has a short ratio of 5.67 compared to a short interest of 6.36 for CNK. This implies that the market is currently less bearish on the outlook for SLCA.Summary
U.S. Silica Holdings, Inc. (NYSE:SLCA) beats Cinemark Holdings, Inc. (NYSE:CNK) on a total of 8 of the 14 factors compared between the two stocks. SLCA has higher cash flow per share, has a higher cash conversion rate, higher liquidity and has lower financial risk. In terms of valuation, SLCA is the cheaper of the two stocks on book value and sales basis, SLCA is more undervalued relative to its price target. Finally, SLCA has better sentiment signals based on short interest.