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A Side-by-side Analysis of United Rentals, Inc. (URI) and Amicus Therapeutics, Inc. (FOLD)

United Rentals, Inc. (NYSE:URI) shares are down more than -5.05% this year and recently decreased -2.97% or -$5 to settle at $163.22. Amicus Therapeutics, Inc. (NASDAQ:FOLD), on the other hand, is down -1.25% year to date as of 04/20/2018. It currently trades at $14.21 and has returned -1.11% during the past week.

United Rentals, Inc. (NYSE:URI) and Amicus Therapeutics, Inc. (NASDAQ:FOLD) are the two most active stocks in the Rental & Leasing Services industry based on today’s trading volumes. To determine if one is a better investment than the other, we will compare the two companies’ growth, profitability, risk, return, and valuation characteristics, as well as their analyst ratings and sentiment signals.

Growth

The ability to grow earnings at a compound rate over time is a crucial determinant of investment value. Analysts expect URI to grow earnings at a 19.70% annual rate over the next 5 years.

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 EBITDA margin and Return on Investment (ROI) as measures of profitability and return. United Rentals, Inc. (URI) has an EBITDA margin of 21.7%. This suggests that URI underlying business is more profitable URI’s ROI is 8.90% while FOLD has a ROI of -21.70%. The interpretation is that URI’s business generates a higher return on investment than FOLD’s.

Cash Flow



Earnings don’t always accurately reflect the amount of cash that a company brings in. URI’s free cash flow (“FCF”) per share for the trailing twelve months was +3.86. Comparatively, FOLD’s free cash flow per share was -0.45. On a percent-of-sales basis, URI’s free cash flow was 4.91% while FOLD converted -0.23% of its revenues into cash flow. This means that, for a given level of sales, URI 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. URI has a current ratio of 1.00 compared to 5.60 for FOLD. This means that FOLD can more easily cover its most immediate liabilities over the next twelve months. URI’s debt-to-equity ratio is 2.99 versus a D/E of 0.47 for FOLD. URI is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

URI trades at a forward P/E of 9.71, a P/B of 4.50, and a P/S of 2.17, compared to a P/B of 6.70, and a P/S of 74.81 for FOLD. 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 isn’t a good investment if the stock is priced accurately. To get a sense of “value” we must compare the current price to some measure of intrinsic value such as a price target. URI is currently priced at a -9.47% to its one-year price target of 180.29. Comparatively, FOLD is -28.7% relative to its price target of 19.93. This suggests that FOLD 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. URI has a beta of 2.51 and FOLD’s beta is 1.44. FOLD’s shares are therefore the less volatile of the two stocks.

Insider Activity and Investor Sentiment




Analysts often look at short interest, or the percentage of a company’s float currently being shorted by investors, to aid in their outlook for a particular stock. URI has a short ratio of 2.37 compared to a short interest of 8.91 for FOLD. This implies that the market is currently less bearish on the outlook for URI.

Summary

United Rentals, Inc. (NYSE:URI) beats Amicus Therapeutics, Inc. (NASDAQ:FOLD) on a total of 8 of the 14 factors compared between the two stocks. URI is growing fastly, is more profitable, generates a higher return on investment, has higher cash flow per share and has a higher cash conversion rate. In terms of valuation, URI is the cheaper of the two stocks on book value and sales basis, Finally, URI has better sentiment signals based on short interest.

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