Earnings

Are These Stocks A Sure Bet? – The Procter & Gamble Company (PG), WPX Energy, Inc. (WPX)

The shares of The Procter & Gamble Company have decreased by more than -20.24% this year alone. The shares recently went down by -0.12% or -$0.09 and now trades at $73.28. The shares of WPX Energy, Inc. (NYSE:WPX), has jumped by 30.21% year to date as of 05/14/2018. The shares currently trade at $18.32 and have been able to report a change of 1.61% over the past one week.

The stock of The Procter & Gamble Company and WPX Energy, Inc. 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.

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. PG has an EBITDA margin of 25.43%, this implies that the underlying business of PG is more profitable. The ROI of PG is 12.70% while that of WPX is 1.30%. These figures suggest that PG ventures generate a higher ROI than that of WPX.

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, PG’s free cash flow per share is a positive 0.93, while that of WPX is negative -13.47.

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 PG is 0.90 and that of WPX is 1.30. This implies that it is easier for PG to cover its immediate obligations over the next 12 months than WPX. The debt ratio of PG is 0.66 compared to 0.00 for WPX. PG can be able to settle its long-term debts and thus is a lower financial risk than WPX.

Valuation

PG currently trades at a forward P/E of 16.40, a P/B of 3.46, and a P/S of 2.78 while WPX trades at a forward P/E of 38.09, a P/B of 1.93, and a P/S of 5.93. This means that looking at the earnings, book values and sales basis, PG 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. Looking at its rival pricing, WPX is at a -11.88% relative to its price target of 20.79.

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 PG is 3.22 while that of WPX is just 4.68. This means that analysts are more bullish on the forecast for PG stock.

Conclusion

The stock of WPX Energy, Inc. defeats that of The Procter & Gamble Company when the two are compared, with WPX taking 3 out of the total factors that were been considered. WPX 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, WPX is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for WPX is better on when it is viewed on short interest.

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