Dissecting the Numbers for Inpixon (INPX) and Southern Copper Corporation (SCCO)

Southern Copper Corporation (NYSE:SCCO), on the other hand, is up 13.69% year to date as of 09/10/2019. It currently trades at $34.51 and has returned 10.40% during the past week.

Inpixon (NASDAQ:INPX) and Southern Copper Corporation (NYSE:SCCO) are the two most active stocks in the Application Software industry based on today’s trading volumes. The market is clearly enthusiastic about both these stocks, but which is the better investment? To answer this, we will compare the two companies based on the strength of their growth, profitability, risk, returns, valuation, analyst recommendations, and insider trends.

Growth

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 INPX to grow earnings at a 20.00% annual rate over the next 5 years. Comparatively, SCCO is expected to grow at a 8.73% annual rate. All else equal, INPX’s higher growth rate would imply a greater potential for capital appreciation.

Profitability and Returns

A high growth rate isn’t necessarily valuable to investors. In fact, companies that overinvest in low return projects just to achieve a high growth rate can actually destroy shareholder value. Profitability and returns are a measure of the quality of a company’s business and its growth opportunities. We’ll use EBITDA margin and Return on Investment (ROI) to measure this. EBITDA margin of 46.85% for Southern Copper Corporation (SCCO). INPX’s ROI is -204.20% while SCCO has a ROI of 14.80%. The interpretation is that SCCO’s business generates a higher return on investment than INPX’s.

Cash Flow

If there’s one thing investors care more about than earnings, it’s cash flow. INPX’s free cash flow (“FCF”) per share for the trailing twelve months was -0.34. Comparatively, SCCO’s free cash flow per share was -0.10. On a percent-of-sales basis, INPX’s free cash flow was -0.13% while SCCO converted -1.09% of its revenues into cash flow. This means that, for a given level of sales, INPX is able to generate more free cash flow for investors.

Liquidity and Financial Risk

Analysts look at liquidity and leverage ratios to assess how easily a company can cover its liabilities. INPX has a current ratio of 0.50 compared to 2.20 for SCCO. This means that SCCO can more easily cover its most immediate liabilities over the next twelve months. INPX’s debt-to-equity ratio is 0.62 versus a D/E of 0.88 for SCCO. SCCO is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

INPX trades at a P/B of 0.11, and a P/S of 0.91, compared to a forward P/E of 14.85, a P/B of 3.96, and a P/S of 3.80 for SCCO. INPX is the cheaper of the two stocks on an earnings, book value and sales basis. 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.

Risk and Volatility

No discussion on value is complete without taking into account risk. Analysts use a stock’s beta, which measures the volatility of a stock compared to the overall market, to measure systematic risk. A stock with a beta above 1 is more volatile than the market. Conversely, a beta below 1 implies a below average level of risk. INPX has a beta of 1.72 and SCCO’s beta is 0.92. SCCO’s shares are therefore the less volatile of the two stocks.

Insider Activity and Investor Sentiment

Short interest is another tool that analysts use to gauge investor sentiment. It represents the percentage of a stock’s tradable shares that are being shorted. INPX has a short ratio of 0.57 compared to a short interest of 5.18 for SCCO. This implies that the market is currently less bearish on the outlook for INPX.

Summary

Inpixon (NASDAQ:INPX) beats Southern Copper Corporation (NYSE:SCCO) on a total of 8 of the 13 factors compared between the two stocks. INPX is growing fastly, has a higher cash conversion rate and has lower financial risk. In terms of valuation, INPX is the cheaper of the two stocks on an earnings, book value and sales basis, Finally, INPX has better sentiment signals based on short interest.