Earnings

BP p.l.c. (BP) is better stock pick than Oracle Corporation (ORCL)

The shares of Oracle Corporation have decreased by more than -1.16% this year alone. The shares recently went down by -0.17% or -$0.08 and now trades at $46.73. The shares of BP p.l.c. (NYSE:BP), has jumped by 11.13% year to date as of 05/16/2018. The shares currently trade at $46.71 and have been able to report a change of -0.15% over the past one week.

The stock of Oracle Corporation and BP p.l.c. were two of the most active stocks on Wednesday. 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. ORCL has an EBITDA margin of 43.76%, this implies that the underlying business of ORCL is more profitable. The ROI of ORCL is 9.50% while that of BP is 2.10%. These figures suggest that ORCL ventures generate a higher ROI than that of BP.

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, ORCL’s free cash flow per share is a positive 5.93, while that of BP is negative -0.08.

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 ORCL is 4.30 and that of BP is 1.10. This implies that it is easier for ORCL to cover its immediate obligations over the next 12 months than BP. The debt ratio of ORCL is 1.25 compared to 0.62 for BP. ORCL can be able to settle its long-term debts and thus is a lower financial risk than BP.

Valuation

ORCL currently trades at a forward P/E of 13.85, a P/B of 4.03, and a P/S of 4.81 while BP trades at a forward P/E of 14.82, a P/B of 1.55, and a P/S of 0.62. This means that looking at the earnings, book values and sales basis, ORCL 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 ORCL is currently at a -16.15% to its one-year price target of 55.73. Looking at its rival pricing, BP is at a 3.34% relative to its price target of 45.20.




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), ORCL is given a 2.20 while 2.40 placed for BP. This means that analysts are more bullish on the outlook for BP 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 ORCL is 2.19 while that of BP is just 0.89. This means that analysts are more bullish on the forecast for BP stock.

Conclusion

The stock of BP p.l.c. defeats that of Oracle Corporation when the two are compared, with BP taking 5 out of the total factors that were been considered. BP 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, BP is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for BP is better on when it is viewed on short interest.

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