Earnings

Reliable Long-term Trend to Profit From: Petroleo Brasileiro S.A. – Petrobras (PBR), Bed Bath & Beyond Inc. (BBBY)

The shares of Petroleo Brasileiro S.A. – Petrobras have increased by more than 34.69% this year alone. The shares recently went down by -2.87% or -$0.41 and now trades at $13.86. The shares of Bed Bath & Beyond Inc. (NASDAQ:BBBY), has slumped by -21.42% year to date as of 04/13/2018. The shares currently trade at $17.28 and have been able to report a change of -17.71% over the past one week.

The stock of Petroleo Brasileiro S.A. – Petrobras and Bed Bath & Beyond Inc. were two of the most active stocks on Friday. 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 PBR is 5.10% while that of BBBY is 17.90%. These figures suggest that BBBY ventures generate a higher ROI than that of PBR.

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, PBR’s free cash flow per share is a positive 0, while that of BBBY is positive 2.09.

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 PBR is 1.90 and that of BBBY is 1.70. This implies that it is easier for PBR to cover its immediate obligations over the next 12 months than BBBY. The debt ratio of PBR is 1.37 compared to 0.54 for BBBY. PBR can be able to settle its long-term debts and thus is a lower financial risk than BBBY.

Valuation

PBR currently trades at a forward P/E of 10.23, a P/B of 1.17, and a P/S of 1.07 while BBBY trades at a forward P/E of 8.50, a P/B of 0.87, and a P/S of 0.20. This means that looking at the earnings, book values and sales basis, BBBY 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 PBR is currently at a 0% to its one-year price target of 13.86. Looking at its rival pricing, BBBY is at a -11.52% relative to its price target of 19.53.




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), PBR is given a 2.60 while 3.40 placed for BBBY. This means that analysts are more bullish on the outlook for BBBY 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 PBR is 1.66 while that of BBBY is just 4.89. This means that analysts are more bullish on the forecast for PBR stock.

Conclusion

The stock of Petroleo Brasileiro S.A. – Petrobras defeats that of Bed Bath & Beyond Inc. when the two are compared, with PBR taking 4 out of the total factors that were been considered. PBR 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, PBR is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for PBR is better on when it is viewed on short interest.

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