The shares of Transocean Ltd. have decreased by more than -7.30% this year alone. The shares recently went up by 3.34% or $0.32 and now trades at $9.90. The shares of VIVUS, Inc. (NASDAQ:VVUS), has jumped by 16.91% year to date as of 03/12/2018. The shares currently trade at $0.59 and have been able to report a change of 20.56% over the past one week.
The stock of Transocean Ltd. and VIVUS, Inc. 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.
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. The ROI of RIG is -12.60% while that of VVUS is 21.40%. These figures suggest that VVUS ventures generate a higher ROI than that of RIG.
The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, RIG’s free cash flow per share is a positive 10.03.
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 RIG is 3.40 and that of VVUS is 7.50. This implies that it is easier for RIG to cover its immediate obligations over the next 12 months than VVUS. The debt ratio of RIG is 0.58 compared to 587.00 for VVUS. VVUS can be able to settle its long-term debts and thus is a lower financial risk than RIG.
RIG currently trades at a P/B of 0.30, and a P/S of 1.28 while VVUS trades at a P/S of 0.46. This means that looking at the earnings, book values and sales basis, RIG 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 RIG is currently at a -19.71% to its one-year price target of 12.33. Looking at its rival pricing, VVUS is at a -60.67% relative to its price target of 1.50. This figure implies that over the next one year, VVUS 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), RIG is given a 2.70 while 3.00 placed for VVUS. This means that analysts are more bullish on the outlook for VVUS 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 RIG is 6.11 while that of VVUS is just 8.24. This means that analysts are more bullish on the forecast for RIG stock.
The stock of Transocean Ltd. defeats that of VIVUS, Inc. when the two are compared, with RIG taking 5 out of the total factors that were been considered. RIG 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, RIG is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for RIG is better on when it is viewed on short interest.