The shares of SCANA Corporation have decreased by more than -42.88% this year alone. The shares recently went down by -3.75% or -$1.63 and now trades at $41.86. The shares of Lannett Company, Inc. (NYSE:LCI), has jumped by 24.72% year to date as of 11/25/2017. The shares currently trade at $27.50 and have been able to report a change of 14.82% over the past one week.
The stock of SCANA Corporation and Lannett Company, Inc. were two of the most active stocks on Satday. 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: 5.50% versus -3.27%
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 SCG will grow it’s earning at a 5.50% annual rate in the next 5 years. This is in contrast to LCI which will have a positive growth at a -3.27% annual rate. This means that the higher growth rate of SCG 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. SCG has an EBITDA margin of -3655.81%, this implies that the underlying business of LCI is more profitable. The ROI of SCG is 6.70% while that of LCI is 5.80%. These figures suggest that SCG ventures generate a higher ROI than that of LCI.
The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, SCG’s free cash flow per share is a positive 0.27, while that of LCI is positive -0.
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 SCG is 0.90 and that of LCI is 2.50. This implies that it is easier for SCG to cover its immediate obligations over the next 12 months than LCI. The debt ratio of SCG is 1.32 compared to 1.55 for LCI. LCI can be able to settle its long-term debts and thus is a lower financial risk than SCG.
SCG currently trades at a forward P/E of 13.94, a P/B of 1.03, and a P/S of 1.44 while LCI trades at a forward P/E of 9.81, a P/B of 1.77, and a P/S of 1.53. This means that looking at the earnings, book values and sales basis, SCG 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 SCG is currently at a -13.69% to its one-year price target of 48.50. Looking at its rival pricing, LCI is at a 5.44% relative to its price target of 26.08. This figure implies that over the next one year, LCI is a better investment.
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), SCG is given a 3.10 while 2.40 placed for LCI. This means that analysts are more bullish on the outlook for SCG 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 SCG is 1.71 while that of LCI is just 18.84. This means that analysts are more bullish on the forecast for SCG stock.
The stock of Lannett Company, Inc. defeats that of SCANA Corporation when the two are compared, with LCI taking 4 out of the total factors that were been considered. LCI 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, LCI is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for LCI is better on when it is viewed on short interest.