Goldcorp Inc. (NYSE:GG) shares are down more than -0.16% this year and recently decreased -1.54% or -$0.2 to settle at $12.75. ING Groep N.V. (NYSE:ING), on the other hand, is down -2.11% year to date as of 02/21/2018. It currently trades at $18.07 and has returned -2.32% during the past week.
Goldcorp Inc. (NYSE:GG) and ING Groep N.V. (NYSE:ING) are the two most active stocks in the market based on today’s trading volumes. We will compare the two companies based on the strength of various metrics, including growth, profitability, risk, return, and valuation to determine if one is a better investment than the other.
Companies that can consistently grow earnings at a high compound rate usually have the greatest potential to create value for shareholders in the long-run. Analysts expect GG to grow earnings at a 41.18% annual rate over the next 5 years. Comparatively, ING is expected to grow at a 7.20% annual rate. All else equal, GG’s higher growth rate would imply a greater potential for capital appreciation.
Profitability and Returns
Just, if not more, important than the growth rate is the quality of that growth. Growth can actual be harmful to investors if it comes at the cost of weak profitability and low returns. To adjust for differences in capital structure we’ll use Return on Investment (ROI) as measures of profitability and return. GG’s ROI is 5.90% while ING has a ROI of 6.30%. The interpretation is that ING’s business generates a higher return on investment than GG’s.
If there’s one thing investors care more about than earnings, it’s cash flow. GG’s free cash flow (“FCF”) per share for the trailing twelve months was -0.28. Comparatively, ING’s free cash flow per share was -. On a percent-of-sales basis, GG’s free cash flow was -7.09% while ING converted 0% of its revenues into cash flow. This means that, for a given level of sales, ING is able to generate more free cash flow for investors.
Liquidity and Financial Risk
GG’s debt-to-equity ratio is 0.20 versus a D/E of 2.17 for ING. ING is therefore the more solvent of the two companies, and has lower financial risk.
GG trades at a forward P/E of 16.37, a P/B of 0.78, and a P/S of 3.31, compared to a forward P/E of 9.77, a P/B of 1.13, and a P/S of 4.09 for ING. 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
A cheap stock is not necessarily a value stock. Most of the time, a stock is cheap for good reason. A stock only has value if the current price is substantially below the price at which it should trade in the future. GG is currently priced at a -28.73% to its one-year price target of 17.89. Comparatively, ING is -24.08% relative to its price target of 23.80. This suggests that GG 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 2.20 for GG and 1.00 for ING, which implies that analysts are more bullish on the outlook for GG.
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. GG has a beta of 0.10 and ING’s beta is 1.26. GG’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. GG has a short ratio of 1.04 compared to a short interest of 1.59 for ING. This implies that the market is currently less bearish on the outlook for GG.
Goldcorp Inc. (NYSE:GG) beats ING Groep N.V. (NYSE:ING) on a total of 8 of the 14 factors compared between the two stocks. GG is growing fastly, higher liquidity and has lower financial risk. In terms of valuation, GG is the cheaper of the two stocks on book value and sales basis, GG is more undervalued relative to its price target. Finally, GG has better sentiment signals based on short interest.