NVIDIA Corporation (NASDAQ:NVDA) shares are up more than 56.06% this year and recently increased 0.34% or $0.71 to settle at $208.34. YPF Sociedad Anonima (NYSE:YPF), on the other hand, is down -29.05% year to date as of 11/07/2019. It currently trades at $9.50 and has returned 1.50% during the past week.
NVIDIA Corporation (NASDAQ:NVDA) and YPF Sociedad Anonima (NYSE:YPF) are the two most active stocks in the Semiconductor – Specialized 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.
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 NVDA to grow earnings at a 12.50% annual rate over the next 5 years. Comparatively, YPF is expected to grow at a -6.39% annual rate. All else equal, NVDA’s higher growth rate would imply a greater potential for capital appreciation.
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. , compared to an EBITDA margin of 20.68% for YPF Sociedad Anonima (YPF). NVDA’s ROI is 32.50% while YPF has a ROI of -1.10%. The interpretation is that NVDA’s business generates a higher return on investment than YPF’s.Cash Flow
The amount of free cash flow available to investors is ultimately what determines the value of a stock. NVDA’s free cash flow (“FCF”) per share for the trailing twelve months was +1.18. Comparatively, YPF’s free cash flow per share was -28.42. On a percent-of-sales basis, NVDA’s free cash flow was 6.13% while YPF converted -72.24% of its revenues into cash flow. This means that, for a given level of sales, NVDA is able to generate more free cash flow for investors.
Balance sheet risk is one of the biggest factors to consider before investing. NVDA has a current ratio of 8.60 compared to 1.10 for YPF. This means that NVDA can more easily cover its most immediate liabilities over the next twelve months. NVDA’s debt-to-equity ratio is 0.00 versus a D/E of 1.07 for YPF. YPF is therefore the more solvent of the two companies, and has lower financial risk.Valuation
NVDA trades at a forward P/E of 29.24, a P/B of 12.28, and a P/S of 12.36, compared to a forward P/E of 11.49, a P/B of 0.56, and a P/S of 0.53 for YPF. NVDA 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
Investors often compare a stock’s current price to an analyst price target to get a sense of the potential upside within the next year. NVDA is currently priced at a 6.99% to its one-year price target of 194.73. Comparatively, YPF is -44.44% relative to its price target of 17.10. This suggests that YPF is the better investment over the next year.
Risk and Volatility
Beta is an important measure that gives investors a sense of the market risk associated with a particular stock. A beta above 1 signals above average market risk, while a beta below 1 implies below average volatility. NVDA has a beta of 2.06 and YPF’s beta is 1.48. YPF’s shares are therefore the less volatile of the two stocks.Insider Activity and Investor Sentiment
Short interest, or the percentage of a stock’s tradable shares currently being shorted, is another metric investors use to get a pulse on sentiment. NVDA has a short ratio of 1.07 compared to a short interest of 2.29 for YPF. This implies that the market is currently less bearish on the outlook for NVDA.
NVIDIA Corporation (NASDAQ:NVDA) beats YPF Sociedad Anonima (NYSE:YPF) on a total of 8 of the 14 factors compared between the two stocks. NVDA is growing fastly, is more profitable, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate, higher liquidity and has lower financial risk. Finally, NVDA has better sentiment signals based on short interest.