Global

Dissecting the Numbers for Yandex N.V. (YNDX) and LyondellBasell Industries N.V. (LYB)

Yandex N.V. (NASDAQ:YNDX) shares are down more than -2.90% this year and recently decreased -4.59% or -$1.53 to settle at $31.80. LyondellBasell Industries N.V. (NYSE:LYB), on the other hand, is down -11.51% year to date as of 10/10/2018. It currently trades at $97.62 and has returned -7.71% during the past week.

Yandex N.V. (NASDAQ:YNDX) and LyondellBasell Industries N.V. (NYSE:LYB) are the two most active stocks in the Internet Information Providers 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 consistently grow earnings at a high compound rate is a defining characteristic of the best companies for long-term investment. Analysts expect YNDX to grow earnings at a 0.75% annual rate over the next 5 years. Comparatively, LYB is expected to grow at a 8.10% annual rate. All else equal, LYB’s higher growth rate would imply a greater potential for capital appreciation.

Profitability and Returns

A high growth rate isn’t necessarily valuable to investors. In fact, companies that overinvest in low return projects just to achieve a high growth rate can actually destroy shareholder value. Profitability and returns are a measure of the quality of a company’s business and its growth opportunities. We’ll use EBITDA margin and Return on Investment (ROI) to measure this., compared to an EBITDA margin of 21.05% for LyondellBasell Industries N.V. (LYB). YNDX’s ROI is 8.10% while LYB has a ROI of 23.00%. The interpretation is that LYB’s business generates a higher return on investment than YNDX’s.

Cash Flow



If there’s one thing investors care more about than earnings, it’s cash flow. YNDX’s free cash flow (“FCF”) per share for the trailing twelve months was -0.12. Comparatively, LYB’s free cash flow per share was +2.14. On a percent-of-sales basis, YNDX’s free cash flow was -2.41% while LYB converted 2.42% of its revenues into cash flow. This means that, for a given level of sales, LYB 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. YNDX has a current ratio of 2.90 compared to 2.30 for LYB. This means that YNDX can more easily cover its most immediate liabilities over the next twelve months. YNDX’s debt-to-equity ratio is 0.11 versus a D/E of 0.81 for LYB. LYB is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

YNDX trades at a forward P/E of 23.49, a P/B of 3.89, and a P/S of 6.48, compared to a forward P/E of 8.64, a P/B of 3.60, and a P/S of 1.01 for LYB. YNDX 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 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. YNDX is currently priced at a -23.52% to its one-year price target of 41.58. Comparatively, LYB is -16.11% relative to its price target of 116.37. This suggests that YNDX is the better investment over the next year.

Risk and Volatility

Analyst use beta to measure a stock’s volatility relative to the overall market. Stocks with a beta above 1 tend to have bigger swings in price than the market as a whole, the opposite being the case for stocks with a beta below 1. YNDX has a beta of 2.64 and LYB’s beta is 1.15. LYB’s shares are therefore the less volatile of the two stocks.

Insider Activity and Investor Sentiment




Comparing the number of shares sold short to the float is a method analysts often use to get a reading on investor sentiment. YNDX has a short ratio of 0.64 compared to a short interest of 3.65 for LYB. This implies that the market is currently less bearish on the outlook for YNDX.

Summary

LyondellBasell Industries N.V. (NYSE:LYB) beats Yandex N.V. (NASDAQ:YNDX) on a total of 8 of the 14 factors compared between the two stocks. LYB 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, LYB is the cheaper of the two stocks on an earnings, book value and sales basis, Finally, LBTYK has better sentiment signals based on short interest.

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