Earnings

Which of these 2 stocks can turn out to be absolute gem? – Activision Blizzard, Inc. (ATVI), Euronet Worldwide, Inc. (EEFT)

The shares of Activision Blizzard, Inc. have increased by more than 3.87% this year alone. The shares recently went up by 1.87% or $1.21 and now trades at $65.77. The shares of Euronet Worldwide, Inc. (NASDAQ:EEFT), has slumped by -12.82% year to date as of 04/09/2018. The shares currently trade at $73.47 and have been able to report a change of -3.47% over the past one week.

The stock of Activision Blizzard, Inc. and Euronet Worldwide, 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.

Next 5Y EPS Growth: 15.97% versus 15.00%

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 ATVI will grow it’s earning at a 15.97% annual rate in the next 5 years. This is in contrast to EEFT which will have a positive growth at a 15.00% annual rate. This means that the higher growth rate of ATVI 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. ATVI has an EBITDA margin of 29.06%, this implies that the underlying business of ATVI is more profitable. The ROI of ATVI is 7.60% while that of EEFT is 12.50%. These figures suggest that EEFT ventures generate a higher ROI than that of ATVI.

Cash Flow



The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, ATVI’s free cash flow per share is a positive 15.57, while that of EEFT is positive 0.09.

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 ATVI is 1.80 and that of EEFT is 1.30. This implies that it is easier for ATVI to cover its immediate obligations over the next 12 months than EEFT. The debt ratio of ATVI is 0.00 compared to 0.38 for EEFT. EEFT can be able to settle its long-term debts and thus is a lower financial risk than ATVI.

Valuation

ATVI currently trades at a forward P/E of 21.91, a P/B of 5.26, and a P/S of 7.33 while EEFT trades at a forward P/E of 12.29, a P/B of 3.23, and a P/S of 1.69. This means that looking at the earnings, book values and sales basis, EEFT 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 ATVI is currently at a -14.12% to its one-year price target of 76.58. Looking at its rival pricing, EEFT is at a -32.15% relative to its price target of 108.29.

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), ATVI is given a 1.90 while 2.00 placed for EEFT. This means that analysts are more bullish on the outlook for EEFT 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 ATVI is 1.80 while that of EEFT is just 5.95. This means that analysts are more bullish on the forecast for ATVI stock.

Conclusion

The stock of Euronet Worldwide, Inc. defeats that of Activision Blizzard, Inc. when the two are compared, with EEFT taking 5 out of the total factors that were been considered. EEFT 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, EEFT is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for EEFT is better on when it is viewed on short interest.

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