Ciena Corporation (CIEN) vs. At Grand Canyon Education, Inc. (LOPE): Analyzing the Industry’s Most Active Stocks

The shares of Ciena Corporation have increased by more than 21.50% this year alone. The shares recently went up by 1.15% or $0.47 and now trades at $41.20. The shares of Grand Canyon Education, Inc. (NASDAQ:LOPE), has jumped by 21.39% year to date as of 09/04/2019. The shares currently trade at $116.70 and have been able to report a change of -8.07% over the past one week.

The stock of Ciena Corporation and Grand Canyon Education, Inc. were two of the most active stocks on Wednesday. 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.

Profitability and Returns

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. CIEN has an EBITDA margin of 11.02%, this implies that the underlying business of LOPE is more profitable. The ROI of CIEN is 6.80% while that of LOPE is 15.70%. These figures suggest that LOPE ventures generate a higher ROI than that of CIEN.

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, CIEN’s free cash flow per share is a positive 2.66, while that of LOPE is positive 0.01.

Liquidity and Financial Risk

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 CIEN is 2.80 and that of LOPE is 1.00. This implies that it is easier for CIEN to cover its immediate obligations over the next 12 months than LOPE. The debt ratio of CIEN is 0.34 compared to 0.19 for LOPE. CIEN can be able to settle its long-term debts and thus is a lower financial risk than LOPE.

Valuation

CIEN currently trades at a forward P/E of 16.64, a P/B of 3.12, and a P/S of 1.92 while LOPE trades at a forward P/E of 20.03, a P/B of 4.21, and a P/S of 8.15. This means that looking at the earnings, book values and sales basis, CIEN 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 CIEN is currently at a -19.12% to its one-year price target of 50.94. Looking at its rival pricing, LOPE is at a -18.2% relative to its price target of 142.67.

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), CIEN is given a 2.00 while 1.30 placed for LOPE. This means that analysts are more bullish on the outlook for CIEN 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 CIEN is 1.77 while that of LOPE is just 3.73. This means that analysts are more bullish on the forecast for CIEN stock.

Conclusion

The stock of Grand Canyon Education, Inc. defeats that of Ciena Corporation when the two are compared, with LOPE taking 6 out of the total factors that were been considered. LOPE 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, LOPE is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for LOPE is better on when it is viewed on short interest.