The shares of II-VI Incorporated have increased by more than 21.35% this year alone. The shares recently went up by 3.58% or $1.36 and now trades at $39.39. The shares of Revolve Group, Inc. (NYSE:RVLV), has slumped by -24.26% year to date as of 08/13/2019. The shares currently trade at $25.75 and have been able to report a change of -20.33% over the past one week.
The stock of II-VI Incorporated and Revolve Group, Inc. were two of the most active stocks on Tuesday. 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 IIVI will grow it’s earning at a 20.77% annual rate in the next 5 years. This is in contrast to RVLV which will have a positive growth at a 16.68% annual rate. This means that the higher growth rate of IIVI 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. IIVI has an EBITDA margin of 18.2%, this implies that the underlying business of IIVI is more profitable. The ROI of IIVI is 7.10% while that of RVLV is 48.30%. These figures suggest that RVLV ventures generate a higher ROI than that of IIVI.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, IIVI’s free cash flow per share is a negative -0.66.
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 IIVI is 3.40 and that of RVLV is 1.50. This implies that it is easier for IIVI to cover its immediate obligations over the next 12 months than RVLV. The debt ratio of IIVI is 0.48 compared to 0.00 for RVLV. IIVI can be able to settle its long-term debts and thus is a lower financial risk than RVLV.Valuation
IIVI currently trades at a forward P/E of 13.44, a P/B of 2.25, and a P/S of 1.93 while RVLV trades at a forward P/E of 34.11, a P/B of 15.27, and a P/S of 4.02. This means that looking at the earnings, book values and sales basis, IIVI 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 IIVI is currently at a -18.19% to its one-year price target of 48.15. Looking at its rival pricing, RVLV is at a -39.24% relative to its price target of 42.38.
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), IIVI is given a 2.10 while 1.90 placed for RVLV. This means that analysts are more bullish on the outlook for IIVI 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 IIVI is 11.34 while that of RVLV is just 1.97. This means that analysts are more bullish on the forecast for RVLV stock.
The stock of II-VI Incorporated defeats that of Revolve Group, Inc. when the two are compared, with IIVI taking 6 out of the total factors that were been considered. IIVI 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, IIVI is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for IIVI is better on when it is viewed on short interest.