Netflix, Inc. (NASDAQ:NFLX), on the other hand, is up 43.43% year to date as of 12/04/2018. It currently trades at $275.33 and has returned 3.26% during the past week.
Helios and Matheson Analytics Inc. (NASDAQ:HMNY) and Netflix, Inc. (NASDAQ:NFLX) 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, NFLX is expected to grow at a 61.80% annual rate. All else equal, NFLX’s higher growth rate would imply a greater potential for capital appreciation.Profitability and Returns
Growth doesn’t mean much if it comes at the cost of weak profitability. To adjust for differences in capital structure we’ll use EBITDA margin and Return on Investment (ROI) as measures of profitability and return. EBITDA margin of 11.27% for Netflix, Inc. (NFLX). HMNY’s ROI is 171.20% while NFLX has a ROI of 9.80%. The interpretation is that HMNY’s business generates a higher return on investment than NFLX’s.Cash Flow
Earnings don’t always accurately reflect the amount of cash that a company brings in. HMNY’s free cash flow (“FCF”) per share for the trailing twelve months was -0.16. Comparatively, NFLX’s free cash flow per share was -1.61. On a percent-of-sales basis, HMNY’s free cash flow was -2.47% while NFLX converted -6.01% of its revenues into cash flow. This means that, for a given level of sales, HMNY is able to generate more free cash flow for investors.Liquidity and Financial Risk
Analysts look at liquidity and leverage ratios to assess how easily a company can cover its liabilities. HMNY has a current ratio of 0.70 compared to 1.40 for NFLX. This means that NFLX can more easily cover its most immediate liabilities over the next twelve months. HMNY’s debt-to-equity ratio is 0.09 versus a D/E of 1.66 for NFLX. NFLX is therefore the more solvent of the two companies, and has lower financial risk.Valuation
HMNY trades at a P/B of 0.11, and a P/S of 0.13, compared to a forward P/E of 65.68, a P/B of 23.94, and a P/S of 8.14 for NFLX. HMNY is the cheaper of the two stocks on an earnings, book value and sales basis. 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
Just because a stock is cheaper doesn’t mean there’s more value to be had. In order to assess value we need to compare the current price to where it’s likely to trade in the future. HMNY is currently priced at a -100% to its one-year price target of 3000.00. Comparatively, NFLX is -30.81% relative to its price target of 397.95. This suggests that HMNY 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. HMNY has a beta of 1.01 and NFLX’s beta is 1.15. HMNY’s shares are therefore the less volatile of the two stocks.Insider Activity and Investor Sentiment
Comparing the number of shares sold short to the float is a method analysts often use to get a reading on investor sentiment. HMNY has a short ratio of 0.65 compared to a short interest of 1.30 for NFLX. This implies that the market is currently less bearish on the outlook for HMNY.Summary
Helios and Matheson Analytics Inc. (NASDAQ:HMNY) beats Netflix, Inc. (NASDAQ:NFLX) on a total of 10 of the 14 factors compared between the two stocks. HMNY generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate and has lower financial risk. In terms of valuation, HMNY is the cheaper of the two stocks on an earnings, book value and sales basis, HMNY is more undervalued relative to its price target. Finally, HMNY has better sentiment signals based on short interest.