The shares of SolarEdge Technologies, Inc. have increased by more than 146.81% this year alone. The shares recently went up by 5.22% or $4.3 and now trades at $86.63. The shares of Alarm.com Holdings, Inc. (NASDAQ:ALRM), has slumped by -6.90% year to date as of 08/12/2019. The shares currently trade at $48.29 and have been able to report a change of 3.07% over the past one week.
The stock of SolarEdge Technologies, Inc. and Alarm.com Holdings, Inc. were two of the most active stocks on Monday. Investors seem to be very interested in what happens to the stocks of these two companies but do investors favor one over the other? We will analyze the growth, profitability, risk, valuation, and insider trends of both companies and see which one investors prefer.
When a company is able to grow consistently in terms of earnings at a high compound rate have the highest likelihood of creating value for its shareholders over time. Analysts have predicted that SEDG will grow it’s earning at a 20.00% annual rate in the next 5 years. This is in contrast to ALRM which will have a positive growth at a 14.05% annual rate. This means that the higher growth rate of SEDG implies a greater potential for capital appreciation over the years.
Growth alone cannot be used to see if the company will be valuable. Shareholders will be the losers if a company invest in ventures that aren’t profitable enough to support upbeat growth. In order for us to accurately measure profitability and return, we will be using the EBITDA margin and Return on Investment (ROI), which balances the difference in capital structure. SEDG has an EBITDA margin of 12.96%, this implies that the underlying business of SEDG is more profitable. The ROI of SEDG is 22.20% while that of ALRM is 6.40%. These figures suggest that SEDG ventures generate a higher ROI than that of ALRM.Cash Flow
The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, SEDG’s free cash flow per share is a positive 0.
The ability of a company to meet up with its short-term obligations and be able to clear its longer-term debts is measured using Liquidity and leverage ratios. The current ratio for SEDG is 2.90 and that of ALRM is 3.20. This implies that it is easier for SEDG to cover its immediate obligations over the next 12 months than ALRM. The debt ratio of SEDG is 0.04 compared to 0.23 for ALRM. ALRM can be able to settle its long-term debts and thus is a lower financial risk than SEDG.Valuation
SEDG currently trades at a forward P/E of 19.51, a P/B of 6.50, and a P/S of 3.69 while ALRM trades at a forward P/E of 30.52, a P/B of 7.96, and a P/S of 5.33. This means that looking at the earnings, book values and sales basis, SEDG is the cheaper one. It is very obvious that earnings are the most important factors to investors, thus analysts are most likely to place their bet on the P/E.Analyst Price Targets and Opinions
The mistake some people make is that they think a cheap stock has more value to it. In order to know the value of a stock, there is need to compare its current price to its likely trading price in the future. The price of SEDG is currently at a 3.69% to its one-year price target of 83.55. Looking at its rival pricing, ALRM is at a -28.67% relative to its price target of 67.70.
When looking at the investment recommendation on say a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell), SEDG is given a 2.00 while 2.10 placed for ALRM. This means that analysts are more bullish on the outlook for ALRM stocks.Insider Activity and Investor Sentiment
Short interest or otherwise called the percentage of a stock’s tradable shares currently being shorted is another data that investors use to get a handle on sentiment. The short ratio for SEDG is 7.07 while that of ALRM is just 13.20. This means that analysts are more bullish on the forecast for SEDG stock.
The stock of Alarm.com Holdings, Inc. defeats that of SolarEdge Technologies, Inc. when the two are compared, with ALRM taking 2 out of the total factors that were been considered. ALRM happens to be more profitable, generates a higher ROI, has higher cash flow per share, higher liquidity and has a lower financial risk. When looking at the stock valuation, ALRM is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for ALRM is better on when it is viewed on short interest.