Occidental Petroleum Corporation (NYSE:OXY) shares are down more than -0.04% this year and recently increased 2.58% or $1.85 to settle at $73.63. Physicians Realty Trust (NYSE:DOC), on the other hand, is down -17.57% year to date as of 04/13/2018. It currently trades at $14.83 and has returned -3.45% during the past week.
Occidental Petroleum Corporation (NYSE:OXY) and Physicians Realty Trust (NYSE:DOC) are the two most active stocks in the Oil & Gas E&P industry based on today’s trading volumes. We will compare the two companies based on the strength of various metrics, including growth, profitability, risk, return, and valuation to determine if one is a better investment than the other.Growth
The ability to grow earnings at a compound rate over time is a crucial determinant of investment value. Analysts expect OXY to grow earnings at a 55.49% annual rate over the next 5 years. Comparatively, DOC is expected to grow at a 9.70% annual rate. All else equal, OXY’s higher growth rate would imply a greater potential for capital appreciation.Profitability and Returns
A high growth rate isn’t necessarily valuable to investors. In fact, companies that overinvest in low return projects just to achieve a high growth rate can actually destroy shareholder value. Profitability and returns are a measure of the quality of a company’s business and its growth opportunities. We’ll use EBITDA margin and Return on Investment (ROI) to measure this., compared to an EBITDA margin of 47.89% for Physicians Realty Trust (DOC). OXY’s ROI is 2.20% while DOC has a ROI of 0.90%. The interpretation is that OXY’s business generates a higher return on investment than DOC’s.Cash Flow
The value of a stock is simply the present value of its future free cash flows. OXY’s free cash flow (“FCF”) per share for the trailing twelve months was -0.43. Comparatively, DOC’s free cash flow per share was +0.01. On a percent-of-sales basis, OXY’s free cash flow was -2.63% while DOC converted 0% of its revenues into cash flow. This means that, for a given level of sales, DOC is able to generate more free cash flow for investors.Liquidity and Financial Risk
OXY’s debt-to-equity ratio is 0.48 versus a D/E of 0.60 for DOC. DOC is therefore the more solvent of the two companies, and has lower financial risk.
OXY trades at a forward P/E of 26.32, a P/B of 2.74, and a P/S of 4.45, compared to a forward P/E of 49.11, a P/B of 1.08, and a P/S of 7.92 for DOC. 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
A cheap stock is not necessarily a value stock. Most of the time, a stock is cheap for good reason. A stock only has value if the current price is substantially below the price at which it should trade in the future. OXY is currently priced at a -5.38% to its one-year price target of 77.82. Comparatively, DOC is -16.87% relative to its price target of 17.84. This suggests that DOC is the better investment over the next year.
Risk and Volatility
Beta is a metric that investors frequently use to analyze a stock’s systematic risk. A beta above 1 implies above average market volatility. Conversely, a stock with a beta below 1 is seen as less risky than the overall market. OXY has a beta of 0.66 and DOC’s beta is 0.44. DOC’s shares are therefore the less volatile of the two stocks.Insider Activity and Investor Sentiment
Comparing the number of shares sold short to the float is a method analysts often use to get a reading on investor sentiment. OXY has a short ratio of 1.81 compared to a short interest of 2.57 for DOC. This implies that the market is currently less bearish on the outlook for OXY.Summary
Physicians Realty Trust (NYSE:DOC) beats Occidental Petroleum Corporation (NYSE:OXY) on a total of 7 of the 14 factors compared between the two stocks. DOC is growing fastly, has higher cash flow per share and has a higher cash conversion rate. DOC is more undervalued relative to its price target.