The shares of Ameris Bancorp have increased by more than 22.10% this year alone. The shares recently went up by 2.52% or $0.95 and now trades at $38.67. The shares of Mercer International Inc. (NASDAQ:MERC), has jumped by 23.28% year to date as of 09/12/2019. The shares currently trade at $12.87 and have been able to report a change of 4.98% over the past one week.
The stock of Ameris Bancorp and Mercer International Inc. were two of the most active stocks on Thursday. 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.
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 ABCB will grow it’s earning at a 8.00% annual rate in the next 5 years. This is in contrast to MERC which will have a positive growth at a 5.73% annual rate. This means that the higher growth rate of ABCB implies a greater potential for capital appreciation over the years.
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. ABCB has an EBITDA margin of 64.23%, this implies that the underlying business of ABCB is more profitable. The ROI of ABCB is 17.30% while that of MERC is 11.20%. These figures suggest that ABCB ventures generate a higher ROI than that of MERC.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, ABCB’s free cash flow per share is a positive 0.01, while that of MERC is positive 3.78.
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 debt ratio of ABCB is 0.15 compared to 1.56 for MERC. MERC can be able to settle its long-term debts and thus is a lower financial risk than ABCB.Valuation
ABCB currently trades at a forward P/E of 8.88, a P/B of 1.19, and a P/S of 5.41 while MERC trades at a forward P/E of 7.16, a P/B of 1.31, and a P/S of 0.51. This means that looking at the earnings, book values and sales basis, ABCB 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 ABCB is currently at a -16.64% to its one-year price target of 46.39. Looking at its rival pricing, MERC is at a -23.85% relative to its price target of 16.90.
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), ABCB is given a 1.70 while 2.40 placed for MERC. This means that analysts are more bullish on the outlook for MERC 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 ABCB is 3.78 while that of MERC is just 9.29. This means that analysts are more bullish on the forecast for ABCB stock.
The stock of Mercer International Inc. defeats that of Ameris Bancorp when the two are compared, with MERC taking 6 out of the total factors that were been considered. MERC 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, MERC is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for MERC is better on when it is viewed on short interest.