Global

Comparing Sibanye Gold Limited (SBGL) and Ocular Therapeutix, Inc. (OCUL)

Sibanye Gold Limited (NYSE:SBGL) shares are down more than -45.84% this year and recently increased 1.54% or $0.04 to settle at $2.63. Ocular Therapeutix, Inc. (NASDAQ:OCUL), on the other hand, is up 36.40% year to date as of 12/06/2018. It currently trades at $6.07 and has returned 7.24% during the past week.

Sibanye Gold Limited (NYSE:SBGL) and Ocular Therapeutix, Inc. (NASDAQ:OCUL) 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.

Profitability and Returns

Growth in and of itself is not necessarily valuable, and it can even be harmful to shareholders if companies overinvest in unprofitable projects in pursuit of that growth. We will use Return on Investment (ROI), which adjust for differences in capital structure, as measure of profitability and return. SBGL’s ROI is 0.70% while OCUL has a ROI of -140.40%. The interpretation is that SBGL’s business generates a higher return on investment than OCUL’s.

Cash Flow

Cash is king when it comes to investing. On a percent-of-sales basis, SBGL’s free cash flow was 0% while OCUL converted -0.62% of its revenues into cash flow. This means that, for a given level of sales, SBGL 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. SBGL has a current ratio of 1.80 compared to 4.30 for OCUL. This means that OCUL can more easily cover its most immediate liabilities over the next twelve months. SBGL’s debt-to-equity ratio is 1.13 versus a D/E of 0.31 for OCUL. SBGL is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

SBGL trades at a forward P/E of 6.74, a P/B of 0.80, and a P/S of 0.42, compared to a P/B of 5.19, and a P/S of 118.42 for OCUL. 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. SBGL is currently priced at a -57.78% to its one-year price target of 6.23. Comparatively, OCUL is -52.8% relative to its price target of 12.86. This suggests that SBGL 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. SBGL has a beta of -0.16 and OCUL’s beta is 1.51. SBGL’s shares are therefore the less volatile of the two stocks.

Insider Activity and Investor Sentiment

Short interest is another tool that analysts use to gauge investor sentiment. It represents the percentage of a stock’s tradable shares that are being shorted. SBGL has a short ratio of 1.88 compared to a short interest of 8.24 for OCUL. This implies that the market is currently less bearish on the outlook for SBGL.

Summary




Sibanye Gold Limited (NYSE:SBGL) beats Ocular Therapeutix, Inc. (NASDAQ:OCUL) on a total of 9 of the 14 factors compared between the two stocks. SBGL generates a higher return on investment, has higher cash flow per share and has a higher cash conversion rate. In terms of valuation, SBGL is the cheaper of the two stocks on book value and sales basis, SBGL is more undervalued relative to its price target. Finally, SBGL has better sentiment signals based on short interest.

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