Global

Choosing Between Evergy, Inc. (EVRG) and Helix Energy Solutions Group, Inc. (HLX)

Evergy, Inc. (NYSE:EVRG) shares are up more than 15.09% this year and recently increased 1.22% or $0.73 to settle at $60.77. Helix Energy Solutions Group, Inc. (NYSE:HLX), on the other hand, is down -1.99% year to date as of 12/06/2018. It currently trades at $7.39 and has returned -9.10% during the past week.

Evergy, Inc. (NYSE:EVRG) and Helix Energy Solutions Group, Inc. (NYSE:HLX) are the two most active stocks based on recent trading volumes. We will compare the two companies based on the strength of various metrics, including growth, profitability, risk, return, and valuation to determine if one is a better investment than the other.

Growth

The ability to consistently grow earnings at a high compound rate is a defining characteristic of the best companies for long-term investment. Analysts expect EVRG to grow earnings at a 9.20% annual rate over the next 5 years.

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. EBITDA margin of 20.85% for Helix Energy Solutions Group, Inc. (HLX). EVRG’s ROI is 6.40% while HLX has a ROI of -0.10%. The interpretation is that EVRG’s business generates a higher return on investment than HLX’s.

Cash Flow



The amount of free cash flow available to investors is ultimately what determines the value of a stock. On a percent-of-sales basis, EVRG’s free cash flow was 0% while HLX converted 0.01% of its revenues into cash flow. This means that, for a given level of sales, HLX is able to generate more free cash flow for investors.

Liquidity and Financial Risk

Liquidity and leverage ratios are important because they reveal the financial health of a company. EVRG has a current ratio of 0.90 compared to 2.70 for HLX. This means that HLX can more easily cover its most immediate liabilities over the next twelve months. EVRG’s debt-to-equity ratio is 0.78 versus a D/E of 0.27 for HLX. EVRG is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

EVRG trades at a forward P/E of 20.95, a P/B of 1.53, and a P/S of 4.45, compared to a forward P/E of 21.30, a P/B of 0.66, and a P/S of 1.47 for HLX. EVRG is the cheaper of the two stocks on an earnings basis but is expensive in terms of P/B and P/S ratio. 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 isn’t a good investment if the stock is priced accurately. To get a sense of “value” we must compare the current price to some measure of intrinsic value such as a price target. EVRG is currently priced at a 1% to its one-year price target of 60.17. Comparatively, HLX is -37.43% relative to its price target of 11.81. This suggests that HLX is the better investment over the next year.

Risk and Volatility

Analyst use beta to measure a stock’s volatility relative to the overall market. Stocks with a beta above 1 tend to have bigger swings in price than the market as a whole, the opposite being the case for stocks with a beta below 1. EVRG has a beta of 0.24 and HLX’s beta is 2.66. EVRG’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. EVRG has a short ratio of 2.29 compared to a short interest of 5.80 for HLX. This implies that the market is currently less bearish on the outlook for EVRG.

Summary

Helix Energy Solutions Group, Inc. (NYSE:HLX) beats Evergy, Inc. (NYSE:EVRG) on a total of 9 of the 14 factors compared between the two stocks. HLX is growing fastly, has higher cash flow per share, has a higher cash conversion rate, higher liquidity and has lower financial risk. In terms of valuation, HLX is the cheaper of the two stocks on book value and sales basis, HLX is more undervalued relative to its price target. Finally, WYND has better sentiment signals based on short interest.

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