Cardtronics plc (NASDAQ:CATM) shares are down more than -69.43% this year and recently increased 2.58% or $0.42 to settle at $16.68. R.R. Donnelley & Sons Company (NYSE:RRD), on the other hand, is down -52.33% year to date as of 11/15/2017. It currently trades at $7.78 and has returned -4.77% during the past week.

Cardtronics plc (NASDAQ:CATM) and R.R. Donnelley & Sons Company (NYSE:RRD) are the two most active stocks in the Business 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.

**Growth**

The ability to grow earnings at a compound rate over time is a crucial determinant of investment value. Analysts expect CATM to grow earnings at a 14.00% annual rate over the next 5 years. Comparatively, RRD is expected to grow at a 7.50% annual rate. All else equal, CATM’s higher growth rate would imply a greater potential for capital appreciation.

**Profitability and Returns**

Growth isn’t very attractive to investors if companies are sacrificing profitability and shareholder returns to achieve that growth. We will use EBITDA margin and Return on Investment (ROI), which control for differences in capital structure between the two companies, to measure profitability and return. Cardtronics plc (CATM) has an EBITDA margin of 4.7%. This suggests that CATM underlying business is more profitable CATM’s ROI is 12.50% while RRD has a ROI of -12.60%. The interpretation is that CATM’s business generates a higher return on investment than RRD’s.

**Cash Flow **

If there’s one thing investors care more about than earnings, it’s cash flow. CATM’s free cash flow (“FCF”) per share for the trailing twelve months was +0.84. Comparatively, RRD’s free cash flow per share was +0.09. On a percent-of-sales basis, CATM’s free cash flow was 3.03% while RRD converted 0.09% of its revenues into cash flow. This means that, for a given level of sales, CATM is able to generate more free cash flow for investors.

**Liquidity and Financial Risk**

Balance sheet risk is one of the biggest factors to consider before investing. CATM has a current ratio of 0.80 compared to 1.50 for RRD. This means that RRD can more easily cover its most immediate liabilities over the next twelve months.

**Valuation**

CATM trades at a forward P/E of 7.57, a P/B of 2.12, and a P/S of 0.55, compared to a forward P/E of 6.70, and a P/S of 0.08 for RRD. CATM 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. CATM is currently priced at a -33.73% to its one-year price target of 25.17. Comparatively, RRD is -59.05% relative to its price target of 19.00. This suggests that RRD 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 2.70 for CATM and 2.00 for RRD, which implies that analysts are more bullish on the outlook for CATM.

**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. CATM has a beta of 0.76 and RRD’s beta is 1.52. CATM’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. CATM has a short ratio of 6.66 compared to a short interest of 3.82 for RRD. This implies that the market is currently less bearish on the outlook for RRD.

**Summary**

R.R. Donnelley & Sons Company (NYSE:RRD) beats Cardtronics plc (NASDAQ:CATM) on a total of 8 of the 14 factors compared between the two stocks. RRD is growing fastly and has lower financial risk. In terms of valuation, RRD is the cheaper of the two stocks on an earnings, book value and sales basis, RRD is more undervalued relative to its price target. Finally, RRD has better sentiment signals based on short interest.