The shares of Groupon, Inc. have decreased by more than -11.18% this year alone. The shares recently went up by 2.26% or $0.1 and now trades at $4.53. The shares of Royal Dutch Shell plc (NYSE:RDS-A), has jumped by 2.19% year to date as of 04/13/2018. The shares currently trade at $68.17 and have been able to report a change of 3.60% over the past one week.
The stock of Groupon, Inc. and Royal Dutch Shell plc 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.Next 5Y EPS Growth: 31.61% versus 7.00%
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 GRPN will grow it’s earning at a 31.61% annual rate in the next 5 years. This is in contrast to RDS-A which will have a positive growth at a 7.00% annual rate. This means that the higher growth rate of GRPN 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. GRPN has an EBITDA margin of 6.5%, this implies that the underlying business of GRPN is more profitable. The ROI of GRPN is 3.90% while that of RDS-A is 4.30%. These figures suggest that RDS-A ventures generate a higher ROI than that of GRPN.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 GRPN is 0.90 and that of RDS-A is 1.20. This implies that it is easier for GRPN to cover its immediate obligations over the next 12 months than RDS-A. The debt ratio of GRPN is 0.93 compared to 0.44 for RDS-A. GRPN can be able to settle its long-term debts and thus is a lower financial risk than RDS-A.Valuation
GRPN currently trades at a forward P/E of 18.88, a P/B of 10.07, and a P/S of 0.87 while RDS-A trades at a forward P/E of 12.27, a P/B of 1.45, and a P/S of 0.93. This means that looking at the earnings, book values and sales basis, GRPN 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 GRPN is currently at a -14.69% to its one-year price target of 5.31. Looking at its rival pricing, RDS-A is at a -12.2% relative to its price target of 77.64.
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), GRPN is given a 2.80 while 1.60 placed for RDS-A. This means that analysts are more bullish on the outlook for GRPN 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 GRPN is 4.38 while that of RDS-A is just 1.28. This means that analysts are more bullish on the forecast for RDS-A stock.
The stock of Groupon, Inc. defeats that of Royal Dutch Shell plc when the two are compared, with GRPN taking 5 out of the total factors that were been considered. GRPN 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, GRPN is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for GRPN is better on when it is viewed on short interest.