The shares of Nokia Corporation have increased by more than 18.24% this year alone. The shares recently went up by 2.04% or $0.11 and now trades at $5.51. The shares of Ambev S.A. (NYSE:ABEV), has jumped by 3.41% year to date as of 02/12/2018. The shares currently trade at $6.68 and have been able to report a change of 1.52% over the past one week.
The stock of Nokia Corporation and Ambev S.A. were two of the most active stocks on Monday. 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: 17.38% versus 5.33%
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 NOK will grow it’s earning at a 17.38% annual rate in the next 5 years. This is in contrast to ABEV which will have a positive growth at a 5.33% annual rate. This means that the higher growth rate of NOK 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. These figures suggest that ABEV ventures generate a higher ROI than that of NOK.
The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, NOK’s free cash flow per share is a positive 7.37, while that of ABEV is positive 8.43.
NOK currently trades at a forward P/E of 14.24, a P/B of 1.53, and a P/S of 1.14 while ABEV trades at a forward P/E of 24.74, a P/B of 7.28, and a P/S of 7.46. This means that looking at the earnings, book values and sales basis, NOK 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 NOK is currently at a -16.13% to its one-year price target of 6.57. Looking at its rival pricing, ABEV is at a -4.84% relative to its price target of 7.02. This figure implies that over the next one year, ABEV 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), NOK is given a 2.60 while 2.60 placed for ABEV. This means that analysts are equally bullish on their outlook for the two stocks 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 NOK is 2.03 while that of ABEV is just 1.42. This means that analysts are more bullish on the forecast for ABEV stock.
The stock of Ambev S.A. defeats that of Nokia Corporation when the two are compared, with ABEV taking 5 out of the total factors that were been considered. ABEV 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, ABEV is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for ABEV is better on when it is viewed on short interest.