Earnings

Reliable Long-term Trend to Profit From: DENTSPLY SIRONA Inc. (XRAY), Baytex Energy Corp. (BTE)

The shares of DENTSPLY SIRONA Inc. have decreased by more than -23.76% this year alone. The shares recently went up by 2.43% or $1.19 and now trades at $50.19. The shares of Baytex Energy Corp. (NYSE:BTE), has jumped by 12.67% year to date as of 04/16/2018. The shares currently trade at $3.38 and have been able to report a change of 14.19% over the past one week.

The stock of DENTSPLY SIRONA Inc. and Baytex Energy Corp. were two of the most active stocks on Monday. 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: 7.10% versus 18.20%

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 XRAY will grow it’s earning at a 7.10% annual rate in the next 5 years. This is in contrast to BTE which will have a positive growth at a 18.20% annual rate. This means that the higher growth rate of BTE 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. The ROI of XRAY is -18.00% while that of BTE is -0.10%. These figures suggest that BTE ventures generate a higher ROI than that of XRAY.

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, XRAY’s free cash flow per share is a positive 4.04.

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 XRAY is 2.10 and that of BTE is 0.70. This implies that it is easier for XRAY to cover its immediate obligations over the next 12 months than BTE. The debt ratio of XRAY is 0.25 compared to 0.88 for BTE. BTE can be able to settle its long-term debts and thus is a lower financial risk than XRAY.

Valuation

XRAY currently trades at a forward P/E of 16.66, a P/B of 1.74, and a P/S of 2.87 while BTE trades at a P/B of 0.52, and a P/S of 1.18. This means that looking at the earnings, book values and sales basis, XRAY 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 XRAY is currently at a -26.58% to its one-year price target of 68.36. Looking at its rival pricing, BTE is at a -14.21% relative to its price target of 3.94.

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), XRAY is given a 2.10 while 2.70 placed for BTE. This means that analysts are more bullish on the outlook for BTE 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 XRAY is 1.66 while that of BTE is just 8.17. This means that analysts are more bullish on the forecast for XRAY stock.

Conclusion

The stock of Baytex Energy Corp. defeats that of DENTSPLY SIRONA Inc. when the two are compared, with BTE taking 5 out of the total factors that were been considered. BTE 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, BTE is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for BTE is better on when it is viewed on short interest.

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