Which one offer More Market Value? – Uber Technologies, Inc. (UBER), Lyft, Inc. (LYFT)

The shares of Uber Technologies, Inc. have decreased by more than -19.39% this year alone. The shares recently went up by 3.94% or $1.27 and now trades at $33.51. The shares of Lyft, Inc. (NASDAQ:LYFT), has slumped by -41.95% year to date as of 09/10/2019. The shares currently trade at $45.45 and have been able to report a change of 0.07% over the past one week.

The stock of Uber Technologies, Inc. and Lyft, 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.

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. The ROI of UBER is 87.70% while that of LYFT is 34.10%. These figures suggest that UBER ventures generate a higher ROI than that of LYFT.

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, UBER’s free cash flow per share is a negative -14.48.

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 UBER is 2.60 and that of LYFT is 1.70. This implies that it is easier for UBER to cover its immediate obligations over the next 12 months than LYFT. The debt ratio of UBER is 0.31 compared to 0.00 for LYFT. UBER can be able to settle its long-term debts and thus is a lower financial risk than LYFT.

Valuation

UBER currently trades at a P/B of 2.34, and a P/S of 4.77 while LYFT trades at a P/B of 4.00, and a P/S of 4.79. This means that looking at the earnings, book values and sales basis, UBER 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 UBER is currently at a -34.42% to its one-year price target of 51.10. Looking at its rival pricing, LYFT is at a -38.23% relative to its price target of 73.58.

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), UBER is given a 2.30 while 2.30 placed for LYFT. This means that analysts are equally bullish on their outlook for the two stocks 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 UBER is 4.12 while that of LYFT is just 5.62. This means that analysts are more bullish on the forecast for UBER stock.

Conclusion

The stock of Lyft, Inc. defeats that of Uber Technologies, Inc. when the two are compared, with LYFT taking 4 out of the total factors that were been considered. LYFT 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, LYFT is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for LYFT is better on when it is viewed on short interest.