Archrock Partners, L.P. (NASDAQ:APLP) and Seacor Holdings Inc. (NYSE:CKH) are the two most active stocks in the Oil & Gas Equipment & Services 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.
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 Return on Investment (ROI) to measure this. APLP’s ROI is 3.60% while CKH has a ROI of -3.60%. The interpretation is that APLP’s business generates a higher return on investment than CKH’s.
Cash is king when it comes to investing. APLP’s free cash flow (“FCF”) per share for the trailing twelve months was -0.59. Comparatively, CKH’s free cash flow per share was +2.51. On a percent-of-sales basis, APLP’s free cash flow was -0.01% while CKH converted 0.01% of its revenues into cash flow. This means that, for a given level of sales, CKH 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. APLP has a current ratio of 1.90 compared to 2.00 for CKH. This means that CKH can more easily cover its most immediate liabilities over the next twelve months. APLP’s debt-to-equity ratio is 2.90 versus a D/E of 1.36 for CKH. APLP is therefore the more solvent of the two companies, and has lower financial risk.
APLP trades at a forward P/E of 15.21, a P/B of 1.87, and a P/S of 1.74, compared to a forward P/E of 165.50, a P/B of 1.15, and a P/S of 1.00 for CKH. APLP is the cheaper of the two stocks on an earnings basis but is expensive in terms of P/B and P/S 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
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. APLP is currently priced at a -24.44% to its one-year price target of $18.00. Comparatively, CKH is -4.18% relative to its price target of $38.00. This suggests that APLP is the better investment over the next year.
The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 2.60 for APLP and 2.00 for CKH, which implies that analysts are more bullish on the outlook for APLP.
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. APLP has a beta of 2.25 and CKH’s beta is 1.00. CKH’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. APLP has a short ratio of 3.35 compared to a short interest of 6.67 for CKH. This implies that the market is currently less bearish on the outlook for APLP.
Seacor Holdings Inc. (NYSE:CKH) beats Archrock Partners, L.P. (NASDAQ:APLP) on a total of 8 of the 12 factors compared between the two stocks. CKH generates a higher return on investment, has a higher cash conversion rate, higher liquidity and has lower financial risk. In terms of valuation, CKH is the cheaper of the two stocks on book value and sales basis, Finally, SPN has better sentiment signals based on short interest.