Earnings

A Comparison of Top Movers: PGT Innovations, Inc. (PGTI), Mitek Systems, Inc. (MITK)

The shares of PGT Innovations, Inc. have increased by more than 23.20% this year alone. The shares recently went up by 3.28% or $0.66 and now trades at $20.76. The shares of Mitek Systems, Inc. (NASDAQ:MITK), has slumped by -13.52% year to date as of 10/10/2018. The shares currently trade at $7.74 and have been able to report a change of 10.41% over the past one week.

The stock of PGT Innovations, Inc. and Mitek Systems, Inc. were two of the most active stocks on Wednesday. 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.

Next 5Y EPS Growth: 15.80% versus 15.00%

When a company is able to grow consistently in terms of earnings at a high compound rate have the highest likelihood of creating value for its shareholders over time. Analysts have predicted that PGTI will grow it’s earning at a 15.80% annual rate in the next 5 years. This is in contrast to MITK which will have a positive growth at a 15.00% annual rate. This means that the higher growth rate of PGTI implies a greater potential for capital appreciation over the years.

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 the EBITDA margin and Return on Investment (ROI), which balances the difference in capital structure. PGTI has an EBITDA margin of 16.47%, this implies that the underlying business of PGTI is more profitable. The ROI of PGTI is 12.30% while that of MITK is 22.30%. These figures suggest that MITK ventures generate a higher ROI than that of PGTI.

Cash Flow



The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, PGTI’s free cash flow per share is a 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 PGTI is 4.20 and that of MITK is 1.80. This implies that it is easier for PGTI to cover its immediate obligations over the next 12 months than MITK. The debt ratio of PGTI is 1.03 compared to 0.00 for MITK. PGTI can be able to settle its long-term debts and thus is a lower financial risk than MITK.

Valuation

PGTI currently trades at a forward P/E of 16.18, a P/B of 5.00, and a P/S of 2.07 while MITK trades at a forward P/E of 19.50, a P/B of 2.98, and a P/S of 5.42. This means that looking at the earnings, book values and sales basis, PGTI 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.

Analyst Price Targets and Opinions




The mistake some people make is that they think a cheap stock has more value to it. In order to know the value of a stock, there is need to compare its current price to its likely trading price in the future. The price of PGTI is currently at a -23.11% to its one-year price target of 27.00. Looking at its rival pricing, MITK is at a -43.71% relative to its price target of 13.75.

When looking at the investment recommendation on say a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell), PGTI is given a 2.00 while 1.70 placed for MITK. This means that analysts are more bullish on the outlook for PGTI stocks.

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 PGTI is 2.43 while that of MITK is just 5.57. This means that analysts are more bullish on the forecast for PGTI stock.

Conclusion

The stock of Mitek Systems, Inc. defeats that of PGT Innovations, Inc. when the two are compared, with MITK taking 6 out of the total factors that were been considered. MITK 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, MITK is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for MITK is better on when it is viewed on short interest.

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