Seaspan Corporation (NYSE:SSW) shares are up more than 39.26% this year and recently decreased -2.99% or -$0.29 to settle at $9.40. Liberty Oilfield Services Inc. (NYSE:LBRT), on the other hand, is down -28.78% year to date as of 12/06/2018. It currently trades at $15.49 and has returned -9.15% during the past week.
Seaspan Corporation (NYSE:SSW) and Liberty Oilfield Services Inc. (NYSE:LBRT) 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
Companies that can consistently grow earnings at a high compound rate usually have the greatest potential to create value for shareholders in the long-run. Analysts expect SSW to grow earnings at a 27.58% annual rate over the next 5 years. Comparatively, LBRT is expected to grow at a 37.00% annual rate. All else equal, LBRT’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 EBITDA margin and Return on Investment (ROI) to measure this., compared to an EBITDA margin of 15.96% for Liberty Oilfield Services Inc. (LBRT). SSW’s ROI is 6.00% while LBRT has a ROI of 28.70%. The interpretation is that LBRT’s business generates a higher return on investment than SSW’s.Cash Flow
Earnings don’t always accurately reflect the amount of cash that a company brings in. SSW’s free cash flow (“FCF”) per share for the trailing twelve months was +0.63. Comparatively, LBRT’s free cash flow per share was +0.57. On a percent-of-sales basis, SSW’s free cash flow was 0.01% while LBRT converted 4.41% of its revenues into cash flow. This means that, for a given level of sales, LBRT 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. SSW has a current ratio of 0.50 compared to 2.50 for LBRT. This means that LBRT can more easily cover its most immediate liabilities over the next twelve months. SSW’s debt-to-equity ratio is 1.75 versus a D/E of 0.26 for LBRT. SSW is therefore the more solvent of the two companies, and has lower financial risk.Valuation
SSW trades at a forward P/E of 10.34, a P/B of 0.66, and a P/S of 1.66, compared to a forward P/E of 8.37, a P/B of 2.55, and a P/S of 0.85 for LBRT. SSW is the cheaper of the two stocks on book value basis but is expensive in terms of P/E 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. SSW is currently priced at a 9.18% to its one-year price target of 8.61. Comparatively, LBRT is -37.54% relative to its price target of 24.80. This suggests that LBRT is the better investment over the next year.
Insider Activity and Investor Sentiment
The analysis of insider buying and selling trends can be extended to the aggregate level. Short interest, which represents the percentage of a stock’s tradable shares currently being shorted, captures what the market as a whole feels about a stock. SSW has a short ratio of 5.67 compared to a short interest of 10.96 for LBRT. This implies that the market is currently less bearish on the outlook for SSW.Summary
Liberty Oilfield Services Inc. (NYSE:LBRT) beats Seaspan Corporation (NYSE:SSW) on a total of 10 of the 14 factors compared between the two stocks. LBRT is more profitable, generates a higher return on investment, has a higher cash conversion rate, higher liquidity and has lower financial risk. In terms of valuation, LBRT is the cheaper of the two stocks on an earnings and sales basis, LBRT is more undervalued relative to its price target. Finally, ATHN has better sentiment signals based on short interest.