Invacare Corporation (NYSE:IVC) shares are down more than -72.28% this year and recently decreased -9.32% or -$0.48 to settle at $4.67. Endologix, Inc. (NASDAQ:ELGX), on the other hand, is down -87.47% year to date as of 12/06/2018. It currently trades at $0.67 and has returned -23.24% during the past week.
Invacare Corporation (NYSE:IVC) and Endologix, Inc. (NASDAQ:ELGX) are the two most active stocks based on recent trading volumes. The market is clearly enthusiastic about both these stocks, but which is the better investment? To answer this, we will compare the two companies based on the strength of their growth, profitability, risk, returns, valuation, analyst recommendations, and insider trends.Growth
Companies that can increase earnings at a high compound rate over time are attractive to investors. Analysts expect IVC to grow earnings at a 10.00% annual rate over the next 5 years. Comparatively, ELGX is expected to grow at a 36.95% annual rate. All else equal, ELGX’s higher growth rate would imply a greater potential for capital appreciation.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 EBITDA margin and Return on Investment (ROI), which adjust for differences in capital structure, as measure of profitability and return. Invacare Corporation (IVC) has an EBITDA margin of 0.84%. This suggests that IVC underlying business is more profitable IVC’s ROI is -11.50% while ELGX has a ROI of -14.80%. The interpretation is that IVC’s business generates a higher return on investment than ELGX’s.Cash Flow
Cash is king when it comes to investing. IVC’s free cash flow (“FCF”) per share for the trailing twelve months was -0.19. Comparatively, ELGX’s free cash flow per share was -0.08. On a percent-of-sales basis, IVC’s free cash flow was -0% while ELGX converted -0% of its revenues into cash flow. This means that, for a given level of sales, IVC 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. IVC has a current ratio of 2.00 compared to 1.60 for ELGX. This means that IVC can more easily cover its most immediate liabilities over the next twelve months. IVC’s debt-to-equity ratio is 0.68 versus a D/E of 5.04 for ELGX. ELGX is therefore the more solvent of the two companies, and has lower financial risk.Valuation
IVC trades at a P/B of 0.42, and a P/S of 0.16, compared to a P/B of 1.31, and a P/S of 0.45 for ELGX. 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. IVC is currently priced at a -65.84% to its one-year price target of 13.67. Comparatively, ELGX is -75.81% relative to its price target of 2.77. This suggests that ELGX 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. IVC has a beta of 2.02 and ELGX’s beta is 0.41. ELGX’s shares are therefore the less volatile of the two stocks.Insider Activity and Investor Sentiment
Analysts often look at short interest, or the percentage of a company’s float currently being shorted by investors, to aid in their outlook for a particular stock. IVC has a short ratio of 8.89 compared to a short interest of 3.89 for ELGX. This implies that the market is currently less bearish on the outlook for ELGX.Summary
Invacare Corporation (NYSE:IVC) beats Endologix, Inc. (NASDAQ:ELGX) on a total of 7 of the 14 factors compared between the two stocks. IVC is more profitable, generates a higher return on investment, higher liquidity and has lower financial risk. In terms of valuation, IVC is the cheaper of the two stocks on book value and sales basis, Finally, BJ has better sentiment signals based on short interest.