Earnings

Comparing Valuation And Performance: Forum Energy Technologies, Inc. (FET), Alta Mesa Resources, Inc. (AMR)

The shares of Forum Energy Technologies, Inc. have decreased by more than -60.19% this year alone. The shares recently went down by -8.16% or -$0.55 and now trades at $6.19. The shares of Alta Mesa Resources, Inc. (NASDAQ:AMR), has slumped by -83.75% year to date as of 12/04/2018. The shares currently trade at $1.61 and have been able to report a change of -6.94% over the past one week.

The stock of Forum Energy Technologies, Inc. and Alta Mesa Resources, Inc. were two of the most active stocks on Tuesday. 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. FET has an EBITDA margin of 12.92%, this implies that the underlying business of FET is more profitable. These figures suggest that AMR ventures generate a higher ROI than that of FET.

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 FET is 3.50 and that of AMR is 0.60. This implies that it is easier for FET to cover its immediate obligations over the next 12 months than AMR. The debt ratio of FET is 0.33 compared to 0.47 for AMR. AMR can be able to settle its long-term debts and thus is a lower financial risk than FET.

Valuation



FET currently trades at a forward P/E of 32.41, a P/B of 0.47, and a P/S of 0.68 while AMR trades at a forward P/E of 3.11, a P/B of 0.20, and a P/S of 0.93. This means that looking at the earnings, book values and sales basis, FET 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 FET is currently at a -46.87% to its one-year price target of 11.65. Looking at its rival pricing, AMR is at a -72.62% relative to its price target of 5.88.

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), FET is given a 2.30 while 2.00 placed for AMR. This means that analysts are more bullish on the outlook for FET 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 FET is 6.84 while that of AMR is just 11.48. This means that analysts are more bullish on the forecast for FET stock.

Conclusion

The stock of Forum Energy Technologies, Inc. defeats that of Alta Mesa Resources, Inc. when the two are compared, with FET taking 6 out of the total factors that were been considered. FET 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, FET is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for FET is better on when it is viewed on short interest.

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