Cabot Oil & Gas Corporation (NYSE:COG) shares are down more than -17.85% this year and recently decreased -0.11% or -$0.02 to settle at $18.36. Adamis Pharmaceuticals Corporation (NASDAQ:ADMP), on the other hand, is down -60.46% year to date as of 11/07/2019. It currently trades at $0.89 and has returned 9.84% during the past week.
Cabot Oil & Gas Corporation (NYSE:COG) and Adamis Pharmaceuticals Corporation (NASDAQ:ADMP) are the two most active stocks in the Independent Oil & Gas industry based on today’s trading volumes. Investors are clearly interested in the two names, but is one a better choice than the other? We will compare the two companies across growth, profitability, risk, valuation, and insider trends to answer this question.
One of the key things investors look for in a company is the ability to grow earnings at a high compound rate over time. Analysts expect COG to grow earnings at a 32.64% annual rate over the next 5 years.
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. Cabot Oil & Gas Corporation (COG) has an EBITDA margin of 64.9%. This suggests that COG underlying business is more profitable COG’s ROI is 18.70% while ADMP has a ROI of -79.30%. The interpretation is that COG’s business generates a higher return on investment than ADMP’s.Cash Flow
The value of a stock is simply the present value of its future free cash flows. COG’s free cash flow (“FCF”) per share for the trailing twelve months was +0.09. Comparatively, ADMP’s free cash flow per share was -0.10. On a percent-of-sales basis, COG’s free cash flow was 1.68% while ADMP converted -0.04% of its revenues into cash flow. This means that, for a given level of sales, COG is able to generate more free cash flow for investors.
Analysts look at liquidity and leverage ratios to assess how easily a company can cover its liabilities. COG has a current ratio of 1.40 compared to 1.00 for ADMP. This means that COG can more easily cover its most immediate liabilities over the next twelve months. COG’s debt-to-equity ratio is 0.55 versus a D/E of 0.07 for ADMP. COG is therefore the more solvent of the two companies, and has lower financial risk.Valuation
COG trades at a forward P/E of 13.21, a P/B of 3.42, and a P/S of 3.26, compared to a P/B of 1.25, and a P/S of 3.23 for ADMP. COG is the expensive 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
Just because a stock is cheaper doesn’t mean there’s more value to be had. In order to assess value we need to compare the current price to where it’s likely to trade in the future. COG is currently priced at a -16.7% to its one-year price target of 22.04. Comparatively, ADMP is -73.59% relative to its price target of 3.37. This suggests that ADMP is the better investment over the next year.
Risk and Volatility
Analyst use beta to measure a stock’s volatility relative to the overall market. Stocks with a beta above 1 tend to have bigger swings in price than the market as a whole, the opposite being the case for stocks with a beta below 1. COG has a beta of 0.56 and ADMP’s beta is 1.38. COG’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. COG has a short ratio of 3.51 compared to a short interest of 3.02 for ADMP. This implies that the market is currently less bearish on the outlook for ADMP.
Cabot Oil & Gas Corporation (NYSE:COG) beats Adamis Pharmaceuticals Corporation (NASDAQ:ADMP) on a total of 7 of the 14 factors compared between the two stocks. COG is growing fastly, is more profitable, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate and higher liquidity.