Skyworks Solutions, Inc. (NASDAQ:SWKS) shares are down more than -3.97% this year and recently decreased -2.88% or -$2.7 to settle at $91.18. iQIYI, Inc. (NASDAQ:IQ), on the other hand, is up 14.53% year to date as of 04/20/2018. It currently trades at $17.81 and has returned -7.91% during the past week.
Skyworks Solutions, Inc. (NASDAQ:SWKS) and iQIYI, Inc. (NASDAQ:IQ) are the two most active stocks in the Semiconductor – Integrated Circuits industry based on today’s trading volumes. The market is clearly enthusiastic about both these stocks, but which is the better investment? To answer this, we will compare the two companies based on the strength of their growth, profitability, risk, returns, valuation, analyst recommendations, and insider trends.Growth
The ability to grow earnings at a compound rate over time is a crucial determinant of investment value. Analysts expect SWKS to grow earnings at a 14.43% annual rate over the next 5 years.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. Skyworks Solutions, Inc. (SWKS) has an EBITDA margin of 41.74%. This suggests that SWKS underlying business is more profitable SWKS’s ROI is 24.80% while IQ has a ROI of 28.80%. The interpretation is that IQ’s business generates a higher return on investment than SWKS’s.Liquidity and Financial Risk
Liquidity and leverage ratios are important because they reveal the financial health of a company. SWKS has a current ratio of 8.40 compared to 0.50 for IQ. This means that SWKS can more easily cover its most immediate liabilities over the next twelve months.Valuation
SWKS trades at a forward P/E of 11.07, a P/B of 4.28, and a P/S of 4.76, compared to a P/S of 4.71 for IQ. SWKS 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
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. SWKS is currently priced at a -22.63% to its one-year price target of 117.85.
Insider Activity and Investor Sentiment
Short interest, or the percentage of a stock’s tradable shares currently being shorted, is another metric investors use to get a pulse on sentiment. SWKS has a short ratio of 3.28 compared to a short interest of 0.00 for IQ. This implies that the market is currently less bearish on the outlook for IQ.Summary
iQIYI, Inc. (NASDAQ:IQ) beats Skyworks Solutions, Inc. (NASDAQ:SWKS) on a total of 8 of the 12 factors compared between the two stocks. IQ is growing fastly and has lower financial risk. In terms of valuation, IQ is the cheaper of the two stocks on an earnings, book value and sales basis, Finally, IQ has better sentiment signals based on short interest.