American Electric Technologies, Inc (NASDAQ:AETI) shares are down more than -22.67% this year and recently decreased -22.15% or -$0.33 to settle at $1.16. Atlassian Corporation Plc (NASDAQ:TEAM), on the other hand, is up 87.04% year to date as of 12/06/2018. It currently trades at $85.14 and has returned 5.50% during the past week.
American Electric Technologies, Inc (NASDAQ:AETI) and Atlassian Corporation Plc (NASDAQ:TEAM) 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
The ability to consistently grow earnings at a high compound rate is a defining characteristic of the best companies for long-term investment. Comparatively, TEAM is expected to grow at a 24.80% annual rate. All else equal, TEAM’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. AETI’s ROI is -9.60% while TEAM has a ROI of -3.50%. The interpretation is that TEAM’s business generates a higher return on investment than AETI’s.Cash Flow
Earnings don’t always accurately reflect the amount of cash that a company brings in. AETI’s free cash flow (“FCF”) per share for the trailing twelve months was -0.24. Comparatively, TEAM’s free cash flow per share was +0.31. On a percent-of-sales basis, AETI’s free cash flow was -0% while TEAM converted 0% of its revenues into cash flow. This means that, for a given level of sales, AETI is able to generate more free cash flow for investors.Liquidity and Financial Risk
Analysts look at liquidity and leverage ratios to assess how easily a company can cover its liabilities. AETI has a current ratio of 1.50 compared to 4.20 for TEAM. This means that TEAM can more easily cover its most immediate liabilities over the next twelve months. AETI’s debt-to-equity ratio is 0.02 versus a D/E of 1.16 for TEAM. TEAM is therefore the more solvent of the two companies, and has lower financial risk.Valuation
AETI trades at a P/B of 1.26, and a P/S of 0.59, compared to a forward P/E of 88.14, a P/B of 28.19, and a P/S of 20.85 for TEAM. AETI 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
Investors often compare a stock’s current price to an analyst price target to get a sense of the potential upside within the next year. AETI is currently priced at a -64.85% to its one-year price target of 3.30. Comparatively, TEAM is -6.59% relative to its price target of 91.15. This suggests that AETI 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. AETI has a short ratio of 0.16 compared to a short interest of 4.00 for TEAM. This implies that the market is currently less bearish on the outlook for AETI.Summary
American Electric Technologies, Inc (NASDAQ:AETI) beats Atlassian Corporation Plc (NASDAQ:TEAM) on a total of 7 of the 14 factors compared between the two stocks. AETI has lower financial risk. In terms of valuation, AETI is the cheaper of the two stocks on an earnings, book value and sales basis, AETI is more undervalued relative to its price target. Finally, AETI has better sentiment signals based on short interest.