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Critical Comparison: Ultra Petroleum Corp. (UPL) vs. Athene Holding Ltd. (ATH)

Athene Holding Ltd. (NYSE:ATH), on the other hand, is down -7.77% year to date as of 10/22/2018. It currently trades at $47.69 and has returned -2.19% during the past week.

Ultra Petroleum Corp. (NASDAQ:UPL) and Athene Holding Ltd. (NYSE:ATH) are the two most active stocks in the Independent Oil & Gas industry based on today’s trading volumes. Investors are clearly interested in the two names, but is one a better choice than the other? We will compare the two companies across growth, profitability, risk, valuation, and insider trends to answer this question.

Growth

Companies that can consistently grow earnings at a high compound rate usually have the greatest potential to create value for shareholders in the long-run. Analysts expect UPL to grow earnings at a 20.40% annual rate over the next 5 years. Comparatively, ATH is expected to grow at a 15.00% annual rate. All else equal, UPL’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 18.85% for Athene Holding Ltd. (ATH). UPL’s ROI is 52.00% while ATH has a ROI of 14.10%. The interpretation is that UPL’s business generates a higher return on investment than ATH’s.

Cash Flow



If there’s one thing investors care more about than earnings, it’s cash flow. UPL’s free cash flow (“FCF”) per share for the trailing twelve months was -0.32. Comparatively, ATH’s free cash flow per share was -. On a percent-of-sales basis, UPL’s free cash flow was -0.01% while ATH converted 0% of its revenues into cash flow. This means that, for a given level of sales, ATH is able to generate more free cash flow for investors.

Valuation

UPL trades at a forward P/E of 2.74, and a P/S of 0.33, compared to a forward P/E of 6.71, a P/B of 1.11, and a P/S of 1.11 for ATH. UPL is the cheaper 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

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. UPL is currently priced at a -36.96% to its one-year price target of 2.30. Comparatively, ATH is -26.18% relative to its price target of 64.60. This suggests that UPL is the better investment over the next year.

Insider Activity and Investor Sentiment

Short interest, or the percentage of a stock’s tradable shares currently being shorted, is another metric investors use to get a pulse on sentiment. UPL has a short ratio of 7.30 compared to a short interest of 4.36 for ATH. This implies that the market is currently less bearish on the outlook for ATH.

Summary

Ultra Petroleum Corp. (NASDAQ:UPL) beats Athene Holding Ltd. (NYSE:ATH) on a total of 9 of the 14 factors compared between the two stocks. UPL is growing fastly, is more profitable, generates a higher return on investment, higher liquidity and has lower financial risk. In terms of valuation, UPL is the cheaper of the two stocks on an earnings, book value and sales basis, UPL is more undervalued relative to its price target. Finally, LEA has better sentiment signals based on short interest.

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