Earnings

Which is more compelling pick right now? – Bitauto Holdings Limited (BITA), FuelCell Energy, Inc. (FCEL)

The shares of Bitauto Holdings Limited have decreased by more than -41.04% this year alone. The shares recently went down by -4.63% or -$0.91 and now trades at $18.75. The shares of FuelCell Energy, Inc. (NASDAQ:FCEL), has slumped by -42.06% year to date as of 10/10/2018. The shares currently trade at $0.99 and have been able to report a change of -9.22% over the past one week.

The stock of Bitauto Holdings Limited and FuelCell Energy, 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: 7.65% 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 BITA will grow it’s earning at a 7.65% annual rate in the next 5 years. This is in contrast to FCEL which will have a positive growth at a 15.00% annual rate. This means that the higher growth rate of FCEL 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. The ROI of BITA is -3.40% while that of FCEL is -21.60%. These figures suggest that BITA ventures generate a higher ROI than that of FCEL.

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, BITA’s free cash flow per share is a positive 0, while that of FCEL is negative -0.02.

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 BITA is 1.20 and that of FCEL is 1.90. This implies that it is easier for BITA to cover its immediate obligations over the next 12 months than FCEL. The debt ratio of BITA is 1.48 compared to 1.13 for FCEL. BITA can be able to settle its long-term debts and thus is a lower financial risk than FCEL.

Valuation

BITA currently trades at a forward P/E of 9.79, a P/B of 0.47, and a P/S of 1.00 while FCEL trades at a P/B of 0.89, and a P/S of 0.79. This means that looking at the earnings, book values and sales basis, BITA 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 BITA is currently at a -32.89% to its one-year price target of 27.94. Looking at its rival pricing, FCEL is at a -64.26% relative to its price target of 2.77.

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), BITA is given a 2.80 while 1.80 placed for FCEL. This means that analysts are more bullish on the outlook for BITA 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 BITA is 14.01 while that of FCEL is just 10.02. This means that analysts are more bullish on the forecast for FCEL stock.

Conclusion

The stock of Bitauto Holdings Limited defeats that of FuelCell Energy, Inc. when the two are compared, with BITA taking 4 out of the total factors that were been considered. BITA 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, BITA is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for BITA is better on when it is viewed on short interest.

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