The shares of Harmony Gold Mining Company Limited have increased by more than 60.34% this year alone. The shares recently went down by -3.37% or -$0.1 and now trades at $2.87. The shares of Iridium Communications Inc. (NASDAQ:IRDM), has jumped by 25.15% year to date as of 08/13/2019. The shares currently trade at $23.09 and have been able to report a change of 1.81% over the past one week.
The stock of Harmony Gold Mining Company Limited and Iridium Communications 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 HMY will grow it’s earning at a 0.00% annual rate in the next 5 years. This is in contrast to IRDM which will have a positive growth at a 10.00% annual rate. This means that the higher growth rate of IRDM 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. The ROI of HMY is -14.50% while that of IRDM is 1.60%. These figures suggest that IRDM ventures generate a higher ROI than that of HMY.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, HMY’s free cash flow per share is a negative -10.96, while that of IRDM is also a negative -0.01.
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 HMY is 1.40 and that of IRDM is 1.10. This implies that it is easier for HMY to cover its immediate obligations over the next 12 months than IRDM. The debt ratio of HMY is 0.23 compared to 1.22 for IRDM. IRDM can be able to settle its long-term debts and thus is a lower financial risk than HMY.Valuation
HMY currently trades at a forward P/E of 6.92, a P/B of 0.86, and a P/S of 0.91 while IRDM trades at a P/B of 1.81, and a P/S of 5.62. This means that looking at the earnings, book values and sales basis, HMY 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 HMY is currently at a -10.03% to its one-year price target of 3.19. Looking at its rival pricing, IRDM is at a -13.2% relative to its price target of 26.60.
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), HMY is given a 1.50 while 2.40 placed for IRDM. This means that analysts are more bullish on the outlook for IRDM 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 HMY is 0.87 while that of IRDM is just 9.94. This means that analysts are more bullish on the forecast for HMY stock.
The stock of Iridium Communications Inc. defeats that of Harmony Gold Mining Company Limited when the two are compared, with IRDM taking 6 out of the total factors that were been considered. IRDM 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, IRDM is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for IRDM is better on when it is viewed on short interest.