Liberty Global plc (NASDAQ:LBTYK) shares are down more than -27.30% this year and recently decreased -4.61% or -$1.19 to settle at $24.60. Weibo Corporation (NASDAQ:WB), on the other hand, is down -45.39% year to date as of 10/10/2018. It currently trades at $56.50 and has returned -18.55% during the past week.
Liberty Global plc (NASDAQ:LBTYK) and Weibo Corporation (NASDAQ:WB) are the two most active stocks in the CATV Systems industry 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.Growth
Companies that can increase earnings at a high compound rate over time are attractive to investors. Comparatively, WB is expected to grow at a 46.02% annual rate. All else equal, WB’s higher growth rate would imply a greater potential for capital appreciation.Profitability and Returns
Growth in and of itself is not necessarily valuable, and it can even be harmful to shareholders if companies overinvest in unprofitable projects in pursuit of that growth. We will use EBITDA margin and Return on Investment (ROI), which adjust for differences in capital structure, as measure of profitability and return. EBITDA margin of 37.66% for Weibo Corporation (WB).Cash Flow
The value of a stock is simply the present value of its future free cash flows. LBTYK’s free cash flow (“FCF”) per share for the trailing twelve months was +2.32. Comparatively, WB’s free cash flow per share was +0.47. On a percent-of-sales basis, LBTYK’s free cash flow was 11.87% while WB converted 9.04% of its revenues into cash flow. This means that, for a given level of sales, LBTYK is able to generate more free cash flow for investors.Valuation
LBTYK trades at a forward P/E of 21.39, a P/B of 3.72, and a P/S of 0.86, compared to a forward P/E of 14.76, a P/B of 8.81, and a P/S of 8.73 for WB. 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. LBTYK is currently priced at a -39% to its one-year price target of 40.33. Comparatively, WB is -54.77% relative to its price target of 124.91. This suggests that WB is the better investment over the next year.
Insider Activity and Investor Sentiment
The analysis of insider buying and selling trends can be extended to the aggregate level. Short interest, which represents the percentage of a stock’s tradable shares currently being shorted, captures what the market as a whole feels about a stock. LBTYK has a short ratio of 2.27 compared to a short interest of 3.47 for WB. This implies that the market is currently less bearish on the outlook for LBTYK.Summary
Liberty Global plc (NASDAQ:LBTYK) beats Weibo Corporation (NASDAQ:WB) on a total of 8 of the 14 factors compared between the two stocks. LBTYK has higher cash flow per share, has a higher cash conversion rate and has lower financial risk. In terms of valuation, LBTYK is the cheaper of the two stocks on book value and sales basis, Finally, LBTYK has better sentiment signals based on short interest.