PPL Corporation (NYSE:PPL) shares are up more than 4.62% this year and recently increased 1.13% or $0.33 to settle at $29.64. Aimmune Therapeutics, Inc. (NASDAQ:AIMT), on the other hand, is down -9.87% year to date as of 08/13/2019. It currently trades at $21.56 and has returned 10.56% during the past week.
PPL Corporation (NYSE:PPL) and Aimmune Therapeutics, Inc. (NASDAQ:AIMT) are the two most active stocks in the Electric Utilities industry based on today’s 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.
The ability to consistently grow earnings at a high compound rate is a defining characteristic of the best companies for long-term investment. Analysts expect PPL to grow earnings at a 0.59% annual rate over the next 5 years. Comparatively, AIMT is expected to grow at a 34.60% annual rate. All else equal, AIMT’s higher growth rate would imply a greater potential for capital appreciation.
Just, if not more, important than the growth rate is the quality of that growth. Growth can actual be harmful to investors if it comes at the cost of weak profitability and low returns. To adjust for differences in capital structure we’ll use EBITDA margin and Return on Investment (ROI) as measures of profitability and return. PPL Corporation (PPL) has an EBITDA margin of 57.1%. This suggests that PPL underlying business is more profitableCash Flow
Cash is king when it comes to investing. PPL’s free cash flow (“FCF”) per share for the trailing twelve months was -0.61. Comparatively, AIMT’s free cash flow per share was -0.80.
Liquidity and leverage ratios provide insight into the financial health of a company, and allow investors to determine the likelihood that the company will be able to continue operating as a going concern. PPL has a current ratio of 0.50 compared to 7.60 for AIMT. This means that AIMT can more easily cover its most immediate liabilities over the next twelve months. PPL’s debt-to-equity ratio is 1.90 versus a D/E of 0.15 for AIMT. PPL is therefore the more solvent of the two companies, and has lower financial risk.Valuation
PPL trades at a forward P/E of 11.73, a P/B of 1.79, and a P/S of 2.82, compared to a P/B of 5.22, for AIMT. PPL is the cheaper of the two stocks on book value basis but is expensive in terms of P/E and P/S ratio. 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 is not necessarily a value stock. Most of the time, a stock is cheap for good reason. A stock only has value if the current price is substantially below the price at which it should trade in the future. PPL is currently priced at a -7.43% to its one-year price target of 32.02. Comparatively, AIMT is -54.03% relative to its price target of 46.90. This suggests that AIMT is the better investment over the next year.
Risk and Volatility
Beta is an important measure that gives investors a sense of the market risk associated with a particular stock. A beta above 1 signals above average market risk, while a beta below 1 implies below average volatility. PPL has a beta of 0.53 and AIMT’s beta is -0.09. AIMT’s shares are therefore the less volatile of the two stocks.Insider Activity and Investor Sentiment
Comparing the number of shares sold short to the float is a method analysts often use to get a reading on investor sentiment. PPL has a short ratio of 8.14 compared to a short interest of 20.25 for AIMT. This implies that the market is currently less bearish on the outlook for PPL.
Aimmune Therapeutics, Inc. (NASDAQ:AIMT) beats PPL Corporation (NYSE:PPL) on a total of 8 of the 13 factors compared between the two stocks. AIMT is more profitable, higher liquidity and has lower financial risk. In terms of valuation, AIMT is the cheaper of the two stocks on an earnings and sales basis, AIMT is more undervalued relative to its price target.