Baxter International Inc. (NYSE:BAX) shares are up more than 5.34% this year and recently decreased -0.60% or -$0.41 to settle at $68.09. Liberty Global plc (NASDAQ:LBTYK), on the other hand, is down -6.24% year to date as of 03/13/2018. It currently trades at $31.73 and has returned 0.47% during the past week.
Baxter International Inc. (NYSE:BAX) and Liberty Global plc (NASDAQ:LBTYK) are the two most active stocks in the market based on today’s trading volumes. To determine if one is a better investment than the other, we will compare the two companies’ growth, profitability, risk, return, and valuation characteristics, as well as their analyst ratings and sentiment signals.
The ability to consistently grow earnings at a high compound rate is a defining characteristic of the best companies for long-term investment. Analysts expect BAX to grow earnings at a 13.14% annual rate over the next 5 years.
Profitability and Returns
Growth in and of itself is not necessarily valuable, and it can even be harmful to shareholders if companies overinvest in unprofitable projects in pursuit of that growth. We will use EBITDA margin and Return on Investment (ROI), which adjust for differences in capital structure, as measure of profitability and return. Baxter International Inc. (BAX) has an EBITDA margin of 19.25%. This suggests that BAX underlying business is more profitable
The value of a stock is simply the present value of its future free cash flows. On a percent-of-sales basis, BAX’s free cash flow was 0% while LBTYK converted 10.22% of its revenues into cash flow. This means that, for a given level of sales, LBTYK is able to generate more free cash flow for investors.
BAX trades at a forward P/E of 21.65, a P/B of 4.05, and a P/S of 3.46, compared to a P/B of 3.77, and a P/S of 1.22 for LBTYK. BAX is the expensive of the two stocks on an earnings, book value and sales basis. Given that earnings are what matter most to investors, analysts tend to place a greater weight on the P/E.
Analyst Price Targets and Opinions
When investing it’s crucial to distinguish between price and value. As Warren Buffet said, “price is what you pay, value is what you get”. BAX is currently priced at a -10.33% to its one-year price target of 75.93. Insider Activity and Investor Sentiment
Analysts often look at short interest, or the percentage of a company’s float currently being shorted by investors, to aid in their outlook for a particular stock. BAX has a short ratio of 1.90 compared to a short interest of 2.90 for LBTYK. This implies that the market is currently less bearish on the outlook for BAX.
Liberty Global plc (NASDAQ:LBTYK) beats Baxter International Inc. (NYSE:BAX) on a total of 8 of the 13 factors compared between the two stocks. LBTYK is growing fastly, has a higher cash conversion rate and has lower financial risk. In terms of valuation, LBTYK is the cheaper of the two stocks on an earnings, book value and sales basis, Finally, NVO has better sentiment signals based on short interest.