Medtronic plc (NYSE:MDT) shares are up more than 21.35% this year and recently increased 1.61% or $1.75 to settle at $110.38. Inpixon (NASDAQ:INPX), on the other hand, is down -95.74% year to date as of 09/12/2019. It currently trades at $0.14 and has returned 2.64% during the past week.
Medtronic plc (NYSE:MDT) and Inpixon (NASDAQ:INPX) are the two most active stocks in the Medical Appliances & Equipment industry based on today’s trading volumes. Investor interest in the two stocks is clearly very high, but which is the better investment? To answer this question, we will compare the two companies across growth, profitability, risk, and valuation metrics, and also examine their analyst ratings and insider activity trends.
Companies that can increase earnings at a high compound rate over time are attractive to investors. Analysts expect MDT to grow earnings at a 7.40% annual rate over the next 5 years. Comparatively, INPX is expected to grow at a 20.00% annual rate. All else equal, INPX’s higher growth rate would imply a greater potential for capital appreciation.
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. Medtronic plc (MDT) has an EBITDA margin of 29.65%. This suggests that MDT underlying business is more profitable MDT’s ROI is 7.00% while INPX has a ROI of -204.20%. The interpretation is that MDT’s business generates a higher return on investment than INPX’s.Cash Flow
Earnings don’t always accurately reflect the amount of cash that a company brings in. MDT’s free cash flow (“FCF”) per share for the trailing twelve months was +0.36. Comparatively, INPX’s free cash flow per share was -0.34. On a percent-of-sales basis, MDT’s free cash flow was 1.58% while INPX converted -0.13% of its revenues into cash flow. This means that, for a given level of sales, MDT is able to generate more free cash flow for investors.
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. MDT has a current ratio of 2.70 compared to 0.50 for INPX. This means that MDT can more easily cover its most immediate liabilities over the next twelve months. MDT’s debt-to-equity ratio is 0.52 versus a D/E of 0.62 for INPX. INPX is therefore the more solvent of the two companies, and has lower financial risk.Valuation
MDT trades at a forward P/E of 18.37, a P/B of 2.94, and a P/S of 4.83, compared to a P/B of 0.11, and a P/S of 0.91 for INPX. MDT 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
A cheap stock isn’t a good investment if the stock is priced accurately. To get a sense of “value” we must compare the current price to some measure of intrinsic value such as a price target. MDT is currently priced at a -5.66% to its one-year price target of 117.00.
Risk and Volatility
Beta is an important measure that gives investors a sense of the market risk associated with a particular stock. A beta above 1 signals above average market risk, while a beta below 1 implies below average volatility. MDT has a beta of 0.65 and INPX’s beta is 1.72. MDT’s shares are therefore the less volatile of the two stocks.Insider Activity and Investor Sentiment
Analysts often look at short interest, or the percentage of a company’s float currently being shorted by investors, to aid in their outlook for a particular stock. MDT has a short ratio of 2.32 compared to a short interest of 0.55 for INPX. This implies that the market is currently less bearish on the outlook for INPX.
Medtronic plc (NYSE:MDT) beats Inpixon (NASDAQ:INPX) on a total of 7 of the 13 factors compared between the two stocks. MDT is more profitable, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate, higher liquidity and has lower financial risk.