Jagged Peak Energy Inc. (NYSE:JAG) shares are down more than -18.57% this year and recently decreased -3.60% or -$0.48 to settle at $12.85. U.S. Gold Corp. (NASDAQ:USAU), on the other hand, is up 56.44% year to date as of 01/31/2018. It currently trades at $2.55 and has returned 13.84% during the past week.
Jagged Peak Energy Inc. (NYSE:JAG) and U.S. Gold Corp. (NASDAQ:USAU) are the two most active stocks in the Gold 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.
Profitability and Returns
Growth isn’t very attractive to investors if companies are sacrificing profitability and shareholder returns to achieve that growth. We will use Return on Investment (ROI), which control for differences in capital structure between the two companies, to measure profitability and return. JAG’s ROI is 1.70% while USAU has a ROI of -13.60%. The interpretation is that JAG’s business generates a higher return on investment than USAU’s.
Cash is king when it comes to investing. JAG’s free cash flow (“FCF”) per share for the trailing twelve months was -0.55. Comparatively, USAU’s free cash flow per share was -0.10. On a percent-of-sales basis, JAG’s free cash flow was -0.15% while USAU converted -0.01% of its revenues into cash flow. This means that, for a given level of sales, USAU is able to generate more free cash flow for investors.
Liquidity and Financial Risk
Liquidity and leverage ratios provide insight into the financial health of a company, and allow investors to determine the likelihood that the company will be able to continue operating as a going concern. JAG has a current ratio of 0.40 compared to 7.60 for USAU. This means that USAU can more easily cover its most immediate liabilities over the next twelve months. JAG’s debt-to-equity ratio is 0.05 versus a D/E of 0.00 for USAU. JAG is therefore the more solvent of the two companies, and has lower financial risk.
JAG trades at a forward P/E of 18.33, a P/B of 4.05, and a P/S of 14.44, compared to a P/B of 3.36, and a P/S of 4.08 for USAU. JAG 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
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. JAG is currently priced at a -27.11% to its one-year price target of 17.63. Comparatively, USAU is -15% relative to its price target of 3.00. This suggests that JAG is the better investment over the next year.
The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 2.00 for JAG and 2.00 for USAU, which implies that analysts are equally bullish on their outlook for the two stocks.
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. JAG has a short ratio of 4.45 compared to a short interest of 2.26 for USAU. This implies that the market is currently less bearish on the outlook for USAU.
U.S. Gold Corp. (NASDAQ:USAU) beats Jagged Peak Energy Inc. (NYSE:JAG) on a total of 8 of the 14 factors compared between the two stocks. USAU generates a higher return on investment, has a higher cash conversion rate, higher liquidity and has lower financial risk. In terms of valuation, USAU is the cheaper of the two stocks on an earnings, book value and sales basis, Finally, USAU has better sentiment signals based on short interest.