The shares of The Western Union Company have increased by more than 3.89% this year alone. The shares recently went down by -0.65% or -$0.13 and now trades at $19.75. The shares of Mastercard Incorporated (NYSE:MA), has jumped by 26.93% year to date as of 05/14/2018. The shares currently trade at $192.12 and have been able to report a change of 1.60% over the past one week.
The stock of The Western Union Company and Mastercard Incorporated 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: 4.19% versus 21.48%
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 WU will grow it’s earning at a 4.19% annual rate in the next 5 years. This is in contrast to MA which will have a positive growth at a 21.48% annual rate. This means that the higher growth rate of MA 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. WU has an EBITDA margin of 13.87%, this implies that the underlying business of MA is more profitable. The ROI of WU is 15.60% while that of MA is 44.00%. These figures suggest that MA ventures generate a higher ROI than that of WU.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, WU’s free cash flow per share is a positive 0.42, while that of MA is positive 6.64.Valuation
WU currently trades at a forward P/E of 10.10, and a P/S of 1.62 while MA trades at a forward P/E of 25.99, a P/B of 35.38, and a P/S of 14.83. This means that looking at the earnings, book values and sales basis, WU 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 WU is currently at a -4.5% to its one-year price target of 20.68. Looking at its rival pricing, MA is at a -2.02% relative to its price target of 196.09.
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), WU is given a 3.00 while 1.70 placed for MA. This means that analysts are more bullish on the outlook for WU 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 WU is 8.02 while that of MA is just 1.68. This means that analysts are more bullish on the forecast for MA stock.
The stock of The Western Union Company defeats that of Mastercard Incorporated when the two are compared, with WU taking 6 out of the total factors that were been considered. WU 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, WU is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for WU is better on when it is viewed on short interest.