The shares of Digital Power Corporation have increased by more than 148.89% this year alone. The shares recently went up by 18.12% or $0.25 and now trades at $1.63. The shares of Ceragon Networks Ltd. (NASDAQ:CRNT), has slumped by -22.90% year to date as of 11/28/2017. The shares currently trade at $2.02 and have been able to report a change of 17.44% over the past one week.
The stock of Digital Power Corporation and Ceragon Networks Ltd. were two of the most active stocks on Tueday. 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 Return on Investment (ROI), which balances the difference in capital structure. The ROI of DPW is -30.70% while that of CRNT is 13.30%. These figures suggest that CRNT ventures generate a higher ROI than that of DPW.
The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, DPW’s free cash flow per share is a negative -0.01, while that of CRNT is positive -0.
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 DPW is 0.60 and that of CRNT is 1.80. This implies that it is easier for DPW to cover its immediate obligations over the next 12 months than CRNT. The debt ratio of DPW is 0.48 compared to 0.19 for CRNT. DPW can be able to settle its long-term debts and thus is a lower financial risk than CRNT.
DPW currently trades at a forward P/B of 2.59, and a P/S of 2.29 while CRNT trades at a forward P/E of 11.22, a P/B of 1.24, and a P/S of 0.47 . This means that looking at the earnings, book values and sales basis, CRNT 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.
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 DPW is 0.46 while that of CRNT is just 0.96. This means that analysts are more bullish on the forecast for DPW stock.
The stock of Digital Power Corporation defeats that of Ceragon Networks Ltd. when the two are compared, with DPW taking 4 out of the total factors that were been considered. DPW 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, DPW is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for DPW is better on when it is viewed on short interest.