Ball Corporation (NYSE:BLL) shares are up more than 1.11% this year and recently increased 0.50% or $0.19 to settle at $38.27. Superior Energy Services, Inc. (NYSE:SPN), on the other hand, is up 1.77% year to date as of 07/19/2018. It currently trades at $9.80 and has returned 0.82% during the past week.
Ball Corporation (NYSE:BLL) and Superior Energy Services, Inc. (NYSE:SPN) are the two most active stocks in the Packaging & Containers 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
One of the key things investors look for in a company is the ability to grow earnings at a high compound rate over time. Analysts expect BLL to grow earnings at a 10.11% 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. Ball Corporation (BLL) has an EBITDA margin of 10.58%. This suggests that BLL underlying business is more profitable BLL’s ROI is 6.60% while SPN has a ROI of -6.60%. The interpretation is that BLL’s business generates a higher return on investment than SPN’s.Cash Flow
The value of a stock is simply the present value of its future free cash flows. On a percent-of-sales basis, BLL’s free cash flow was -3.12% while SPN converted 0% of its revenues into cash flow. This means that, for a given level of sales, SPN is able to generate more free cash flow for investors.Liquidity and Financial Risk
Liquidity and leverage ratios measure a company’s ability to meet short-term obligations and longer-term debts. BLL has a current ratio of 1.10 compared to 1.90 for SPN. This means that SPN can more easily cover its most immediate liabilities over the next twelve months. BLL’s debt-to-equity ratio is 1.85 versus a D/E of 1.19 for SPN. BLL is therefore the more solvent of the two companies, and has lower financial risk.Valuation
BLL trades at a forward P/E of 14.21, a P/B of 3.32, and a P/S of 1.19, compared to a P/B of 1.40, and a P/S of 0.79 for SPN. BLL 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. BLL is currently priced at a -14.52% to its one-year price target of 44.77. Comparatively, SPN is -21.97% relative to its price target of 12.56. This suggests that SPN is the better investment over the next year.
Risk and Volatility
Beta is a metric that investors frequently use to analyze a stock’s systematic risk. A beta above 1 implies above average market volatility. Conversely, a stock with a beta below 1 is seen as less risky than the overall market. BLL has a beta of 0.82 and SPN’s beta is 2.15. BLL’s shares are therefore the less volatile of the two stocks.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. BLL has a short ratio of 4.84 compared to a short interest of 4.42 for SPN. This implies that the market is currently less bearish on the outlook for SPN.Summary
Superior Energy Services, Inc. (NYSE:SPN) beats Ball Corporation (NYSE:BLL) on a total of 9 of the 14 factors compared between the two stocks. SPN is growing fastly, has a higher cash conversion rate, higher liquidity and has lower financial risk. In terms of valuation, SPN is the cheaper of the two stocks on an earnings, book value and sales basis, SPN is more undervalued relative to its price target. Finally, SPN has better sentiment signals based on short interest.