GrubHub Inc. (NYSE:GRUB) shares are up more than 64.09% this year and recently decreased -8.28% or -$10.63 to settle at $117.82. Agilent Technologies, Inc. (NYSE:A), on the other hand, is down -0.45% year to date as of 10/10/2018. It currently trades at $66.67 and has returned -7.56% during the past week.
GrubHub Inc. (NYSE:GRUB) and Agilent Technologies, Inc. (NYSE:A) are the two most active stocks in the Internet Information Providers industry based on today’s trading volumes. To determine if one is a better investment than the other, we will compare the two companies’ growth, profitability, risk, return, and valuation characteristics, as well as their analyst ratings and sentiment signals.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 GRUB to grow earnings at a 29.08% annual rate over the next 5 years. Comparatively, A is expected to grow at a 10.84% annual rate. All else equal, GRUB’s higher growth rate would imply a greater potential for capital appreciation.Profitability and Returns
Growth doesn’t mean much if it comes at the cost of weak profitability. To adjust for differences in capital structure we’ll use EBITDA margin and Return on Investment (ROI) as measures of profitability and return. , compared to an EBITDA margin of 25.18% for Agilent Technologies, Inc. (A). GRUB’s ROI is 5.10% while A has a ROI of 10.60%. The interpretation is that A’s business generates a higher return on investment than GRUB’s.Cash Flow
Earnings don’t always accurately reflect the amount of cash that a company brings in. GRUB’s free cash flow (“FCF”) per share for the trailing twelve months was +0.26. Comparatively, A’s free cash flow per share was +0.36. On a percent-of-sales basis, GRUB’s free cash flow was 0% while A converted 2.57% of its revenues into cash flow. This means that, for a given level of sales, A is able to generate more free cash flow for investors.Liquidity and Financial Risk
Liquidity and leverage ratios are important because they reveal the financial health of a company. GRUB has a current ratio of 3.40 compared to 3.60 for A. This means that A can more easily cover its most immediate liabilities over the next twelve months. GRUB’s debt-to-equity ratio is 0.09 versus a D/E of 0.39 for A. A is therefore the more solvent of the two companies, and has lower financial risk.Valuation
GRUB trades at a forward P/E of 49.32, a P/B of 7.55, and a P/S of 12.75, compared to a forward P/E of 22.47, a P/B of 4.68, and a P/S of 4.44 for A. GRUB 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
Investors often compare a stock’s current price to an analyst price target to get a sense of the potential upside within the next year. GRUB is currently priced at a -16.2% to its one-year price target of 140.59. Comparatively, A is -15.38% relative to its price target of 78.79. This suggests that GRUB is the better investment over the next year.
Risk and Volatility
No discussion on value is complete without taking into account risk. Analysts use a stock’s beta, which measures the volatility of a stock compared to the overall market, to measure systematic risk. A stock with a beta above 1 is more volatile than the market. Conversely, a beta below 1 implies a below average level of risk. GRUB has a beta of 1.15 and A’s beta is 1.39. GRUB’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. GRUB has a short ratio of 3.90 compared to a short interest of 1.99 for A. This implies that the market is currently less bearish on the outlook for A.Summary
Agilent Technologies, Inc. (NYSE:A) beats GrubHub Inc. (NYSE:GRUB) on a total of 10 of the 14 factors compared between the two stocks. A is growing fastly, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate and higher liquidity. In terms of valuation, A is the cheaper of the two stocks on an earnings, book value and sales basis, Finally, A has better sentiment signals based on short interest.