The shares of J. C. Penney Company, Inc. have increased by more than 29.43% this year alone. The shares recently went up by 3.02% or $0.12 and now trades at $4.09. The shares of Ring Energy, Inc. (NYSE:REI), has jumped by 10.14% year to date as of 01/11/2018. The shares currently trade at $15.31 and have been able to report a change of 3.24% over the past one week.
The stock of J. C. Penney Company, Inc. and Ring Energy, 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.
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. JCP has an EBITDA margin of 5.73%, this implies that the underlying business of REI is more profitable. The ROI of JCP is 5.90% while that of REI is -12.80%. These figures suggest that JCP ventures generate a higher ROI than that of REI.
The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, JCP’s free cash flow per share is a negative -2.66, while that of REI is also a negative -0.1.
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 JCP is 1.40 and that of REI is 2.30. This implies that it is easier for JCP to cover its immediate obligations over the next 12 months than REI. The debt ratio of JCP is 4.17 compared to 0.00 for REI. JCP can be able to settle its long-term debts and thus is a lower financial risk than REI.
JCP currently trades at a forward P/E of 21.64, a P/B of 1.18, and a P/S of 0.10 while REI trades at a forward P/E of 24.98, a P/B of 2.25, and a P/S of 15.63. This means that looking at the earnings, book values and sales basis, JCP 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 JCP is currently at a 8.49% to its one-year price target of 3.77. Looking at its rival pricing, REI is at a -16.34% relative to its price target of 18.30. This figure implies that over the next one year, REI 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), JCP is given a 3.00 while 1.80 placed for REI. This means that analysts are more bullish on the outlook for JCP 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 JCP is 7.22 while that of REI is just 12.47. This means that analysts are more bullish on the forecast for JCP stock.
The stock of J. C. Penney Company, Inc. defeats that of Ring Energy, Inc. when the two are compared, with JCP taking 5 out of the total factors that were been considered. JCP 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, JCP is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for JCP is better on when it is viewed on short interest.