Wipro Limited (NYSE:WIT) shares are down more than -4.75% this year and recently decreased -0.76% or -$0.04 to settle at $5.21. SailPoint Technologies Holdings, Inc. (NYSE:SAIL), on the other hand, is up 76.48% year to date as of 12/06/2018. It currently trades at $25.59 and has returned 1.35% during the past week.
Wipro Limited (NYSE:WIT) and SailPoint Technologies Holdings, Inc. (NYSE:SAIL) are the two most active stocks based on recent trading volumes. Investors are clearly interested in the two names, but is one a better choice than the other? We will compare the two companies across growth, profitability, risk, valuation, and insider trends to answer this question.Growth
One of the key things investors look for in a company is the ability to grow earnings at a high compound rate over time. Analysts expect WIT to grow earnings at a 8.00% annual rate over the next 5 years. Comparatively, SAIL is expected to grow at a 15.00% annual rate. All else equal, SAIL’s higher growth rate would imply a greater potential for capital appreciation.Profitability and Returns
A high growth rate isn’t necessarily valuable to investors. In fact, companies that overinvest in low return projects just to achieve a high growth rate can actually destroy shareholder value. Profitability and returns are a measure of the quality of a company’s business and its growth opportunities. We’ll use Return on Investment (ROI) to measure this. WIT’s ROI is 9.70% while SAIL has a ROI of 1.50%. The interpretation is that WIT’s business generates a higher return on investment than SAIL’s.Cash Flow
Earnings don’t always accurately reflect the amount of cash that a company brings in. WIT’s free cash flow (“FCF”) per share for the trailing twelve months was +3.32. Comparatively, SAIL’s free cash flow per share was +0.01. On a percent-of-sales basis, WIT’s free cash flow was 178.49% while SAIL converted 0% of its revenues into cash flow. This means that, for a given level of sales, WIT is able to generate more free cash flow for investors.Liquidity and Financial Risk
Liquidity and leverage ratios provide insight into the financial health of a company, and allow investors to determine the likelihood that the company will be able to continue operating as a going concern. WIT has a current ratio of 2.50 compared to 1.40 for SAIL. This means that WIT can more easily cover its most immediate liabilities over the next twelve months. WIT’s debt-to-equity ratio is 0.22 versus a D/E of 0.03 for SAIL. WIT is therefore the more solvent of the two companies, and has lower financial risk.Valuation
WIT trades at a forward P/E of 17.19, a P/B of 3.14, and a P/S of 2.50, compared to a forward P/E of 104.88, a P/B of 6.63, and a P/S of 9.00 for SAIL. WIT 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. WIT is currently priced at a 7.87% to its one-year price target of 4.83. Comparatively, SAIL is -20.03% relative to its price target of 32.00. This suggests that SAIL is the better investment over the next year.
Insider Activity and Investor Sentiment
Short interest, or the percentage of a stock’s tradable shares currently being shorted, is another metric investors use to get a pulse on sentiment. WIT has a short ratio of 14.44 compared to a short interest of 1.24 for SAIL. This implies that the market is currently less bearish on the outlook for SAIL.Summary
Wipro Limited (NYSE:WIT) beats SailPoint Technologies Holdings, Inc. (NYSE:SAIL) on a total of 7 of the 14 factors compared between the two stocks. WIT generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate and higher liquidity. In terms of valuation, WIT is the cheaper of the two stocks on an earnings, book value and sales basis, Finally, AYX has better sentiment signals based on short interest.