Earnings

Which is more compelling pick right now? – MBIA Inc. (MBI), Nordic American Tankers Limited (NAT)

The shares of MBIA Inc. have increased by more than 27.87% this year alone. The shares recently went down by -13.73% or -$1.49 and now trades at $9.36. The shares of Nordic American Tankers Limited (NYSE:NAT), has slumped by -11.38% year to date as of 04/13/2018. The shares currently trade at $2.18 and have been able to report a change of 16.58% over the past one week.

The stock of MBIA Inc. and Nordic American Tankers Limited 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: 10.00% versus 5.00%

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 MBI will grow it’s earning at a 10.00% annual rate in the next 5 years. This is in contrast to NAT which will have a positive growth at a 5.00% annual rate. This means that the higher growth rate of MBI 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. These figures suggest that NAT ventures generate a higher ROI than that of MBI.

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, MBI’s free cash flow per share is a positive 0.01, while that of NAT is negative -0.01.

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 debt ratio of MBI is 3.90 compared to 0.46 for NAT. MBI can be able to settle its long-term debts and thus is a lower financial risk than NAT.

Valuation

MBI currently trades at a P/B of 0.63, and a P/S of 1.80 while NAT trades at a P/B of 0.28, and a P/S of 1.14. This means that looking at the earnings, book values and sales basis, MBI 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 MBI is currently at a -16.95% to its one-year price target of 11.27. Looking at its rival pricing, NAT is at a -40.27% relative to its price target of 3.65.

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), MBI is given a 2.30 while 3.40 placed for NAT. This means that analysts are more bullish on the outlook for NAT 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 MBI is 18.10 while that of NAT is just 5.67. This means that analysts are more bullish on the forecast for NAT stock.

Conclusion

The stock of MBIA Inc. defeats that of Nordic American Tankers Limited when the two are compared, with MBI taking 4 out of the total factors that were been considered. MBI 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, MBI is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for MBI is better on when it is viewed on short interest.

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