The shares of Nielsen Holdings plc have decreased by more than -9.18% this year alone. The shares recently went down by -1.61% or -$0.54 and now trades at $33.06. The shares of Devon Energy Corporation (NYSE:DVN), has slumped by -16.50% year to date as of 02/13/2018. The shares currently trade at $34.57 and have been able to report a change of -9.93% over the past one week.
The stock of Nielsen Holdings plc and Devon Energy Corporation were two of the most active stocks on Tuesday. 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. NLSN has an EBITDA margin of 19.52%, this implies that the underlying business of DVN is more profitable. The ROI of NLSN is 6.60% while that of DVN is -18.60%. These figures suggest that NLSN ventures generate a higher ROI than that of DVN.
The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, NLSN’s free cash flow per share is a positive 4.88, while that of DVN is positive 0.04.
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 NLSN is 1.30 and that of DVN is 1.60. This implies that it is easier for NLSN to cover its immediate obligations over the next 12 months than DVN. The debt ratio of NLSN is 1.99 compared to 1.46 for DVN. NLSN can be able to settle its long-term debts and thus is a lower financial risk than DVN.
NLSN currently trades at a forward P/E of 10.98, a P/B of 2.77, and a P/S of 1.80 while DVN trades at a forward P/E of 11.32, a P/B of 2.52, and a P/S of 1.43. This means that looking at the earnings, book values and sales basis, NLSN 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 NLSN is currently at a -20.59% to its one-year price target of 41.63. Looking at its rival pricing, DVN is at a -30.96% relative to its price target of 50.07. This figure implies that over the next one year, DVN 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), NLSN is given a 2.20 while 2.00 placed for DVN. This means that analysts are more bullish on the outlook for NLSN 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 NLSN is 6.60 while that of DVN is just 2.71. This means that analysts are more bullish on the forecast for DVN stock.
The stock of Nielsen Holdings plc defeats that of Devon Energy Corporation when the two are compared, with NLSN taking 6 out of the total factors that were been considered. NLSN 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, NLSN is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for NLSN is better on when it is viewed on short interest.