Endeavour Silver Corp. (EXK) vs. Pacific Premier Bancorp, Inc. (PPBI): Breaking Down the Silver Industry’s Two Hottest Stocks

Endeavour Silver Corp. (NYSE:EXK) shares are up more than 17.21% this year and recently decreased -0.40% or -$0.01 to settle at $2.52. Pacific Premier Bancorp, Inc. (NASDAQ:PPBI), on the other hand, is up 24.22% year to date as of 09/10/2019. It currently trades at $31.70 and has returned 11.19% during the past week.

Endeavour Silver Corp. (NYSE:EXK) and Pacific Premier Bancorp, Inc. (NASDAQ:PPBI) are the two most active stocks in the Silver 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

Companies that can consistently grow earnings at a high compound rate usually have the greatest potential to create value for shareholders in the long-run. Comparatively, PPBI is expected to grow at a 8.00% annual rate. All else equal, PPBI’s higher growth rate would imply a greater potential for capital appreciation.

Profitability and Returns

Growth doesn’t mean much if it comes at the cost of weak profitability. To adjust for differences in capital structure we’ll use EBITDA margin and Return on Investment (ROI) as measures of profitability and return. EBITDA margin of 60.04% for Pacific Premier Bancorp, Inc. (PPBI). EXK’s ROI is -9.00% while PPBI has a ROI of 16.40%. The interpretation is that PPBI’s business generates a higher return on investment than EXK’s.

Cash Flow

The amount of free cash flow available to investors is ultimately what determines the value of a stock. EXK’s free cash flow (“FCF”) per share for the trailing twelve months was -0.06. Comparatively, PPBI’s free cash flow per share was +0.40. On a percent-of-sales basis, EXK’s free cash flow was -0.01% while PPBI converted 0.01% of its revenues into cash flow. This means that, for a given level of sales, PPBI is able to generate more free cash flow for investors.

Liquidity and Financial Risk

EXK’s debt-to-equity ratio is 0.03 versus a D/E of 0.00 for PPBI. EXK is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

EXK trades at a forward P/E of 27.10, a P/B of 2.52, and a P/S of 2.76, compared to a forward P/E of 12.20, a P/B of 0.98, and a P/S of 3.63 for PPBI. EXK is the cheaper of the two stocks on sales basis but is expensive in terms of P/E and P/B 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

When investing it’s crucial to distinguish between price and value. As Warren Buffet said, “price is what you pay, value is what you get”. EXK is currently priced at a -43.62% to its one-year price target of 4.47. Comparatively, PPBI is -6.76% relative to its price target of 34.00. This suggests that EXK is the better investment over the next year.

Risk and Volatility

To gauge the market risk of a particular stock, investors use beta. Stocks with a beta above 1 are more volatile than the market as a whole. Conversely, a beta below 1 implies below average systematic risk. EXK has a beta of 0.15 and PPBI’s beta is 1.24. EXK’s shares are therefore the less volatile of the two stocks.

Insider Activity and Investor Sentiment

The analysis of insider buying and selling trends can be extended to the aggregate level. Short interest, which represents the percentage of a stock’s tradable shares currently being shorted, captures what the market as a whole feels about a stock. EXK has a short ratio of 2.16 compared to a short interest of 6.46 for PPBI. This implies that the market is currently less bearish on the outlook for EXK.

Summary

Pacific Premier Bancorp, Inc. (NASDAQ:PPBI) beats Endeavour Silver Corp. (NYSE:EXK) on a total of 9 of the 14 factors compared between the two stocks. PPBI higher liquidity, is more profitable, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate and has lower financial risk. In terms of valuation, PPBI is the cheaper of the two stocks on an earnings and book value,