Earnings

Which Market Offer More Value? – AbbVie Inc. (ABBV), First Majestic Silver Corp. (AG)

The shares of AbbVie Inc. have decreased by more than -5.05% this year alone. The shares recently went down by -0.31% or -$0.29 and now trades at $91.83. The shares of First Majestic Silver Corp. (NYSE:AG), has slumped by -1.19% year to date as of 04/13/2018. The shares currently trade at $6.66 and have been able to report a change of 8.82% over the past one week.

The stock of AbbVie Inc. and First Majestic Silver Corp. 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: 16.82% versus 46.80%

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 ABBV will grow it’s earning at a 16.82% annual rate in the next 5 years. This is in contrast to AG which will have a positive growth at a 46.80% annual rate. This means that the higher growth rate of AG 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. ABBV has an EBITDA margin of 36.26%, this implies that the underlying business of ABBV is more profitable. These figures suggest that ABBV ventures generate a higher ROI than that of AG.

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, ABBV’s free cash flow per share is a positive 4.84.

Valuation

ABBV currently trades at a forward P/E of 10.52, a P/B of 28.79, and a P/S of 5.18 while AG trades at a forward P/E of 111.00, a P/B of 1.90, and a P/S of 4.37. This means that looking at the earnings, book values and sales basis, ABBV 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 ABBV is currently at a -23.32% to its one-year price target of 119.76. Looking at its rival pricing, AG is at a -30.19% relative to its price target of 9.54.




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), ABBV is given a 2.30 while 2.30 placed for AG. This means that analysts are equally bullish on their outlook for the two stocks 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 ABBV is 1.94 while that of AG is just 5.33. This means that analysts are more bullish on the forecast for ABBV stock.

Conclusion

The stock of First Majestic Silver Corp. defeats that of AbbVie Inc. when the two are compared, with AG taking 6 out of the total factors that were been considered. AG 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, AG is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for AG is better on when it is viewed on short interest.

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