The shares of SM Energy Company have increased by more than 15.31% this year alone. The shares recently went up by 1.07% or $0.27 and now trades at $25.46. The shares of EOG Resources, Inc. (NYSE:EOG), has jumped by 12.59% year to date as of 05/16/2018. The shares currently trade at $121.50 and have been able to report a change of 3.15% over the past one week.
The stock of SM Energy Company and EOG Resources, Inc. 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. SM has an EBITDA margin of 9.45%, this implies that the underlying business of EOG is more profitable. The ROI of SM is -0.90% while that of EOG is 2.90%. These figures suggest that EOG ventures generate a higher ROI than that of SM.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, SM’s free cash flow per share is a negative -14.14, while that of EOG is positive 0.1.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 SM is 1.40 and that of EOG is 1.30. This implies that it is easier for SM to cover its immediate obligations over the next 12 months than EOG. The debt ratio of SM is 1.07 compared to 0.38 for EOG. SM can be able to settle its long-term debts and thus is a lower financial risk than EOG.Valuation
SM currently trades at a forward P/E of 16.66, a P/B of 1.05, and a P/S of 2.18 while EOG trades at a forward P/E of 21.33, a P/B of 4.15, and a P/S of 5.70. This means that looking at the earnings, book values and sales basis, SM 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 SM is currently at a -13.08% to its one-year price target of 29.29. Looking at its rival pricing, EOG is at a -4.18% relative to its price target of 126.80.
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), SM is given a 2.20 while 2.10 placed for EOG. This means that analysts are more bullish on the outlook for SM 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 SM is 5.88 while that of EOG is just 3.15. This means that analysts are more bullish on the forecast for EOG stock.
The stock of SM Energy Company defeats that of EOG Resources, Inc. when the two are compared, with SM taking 5 out of the total factors that were been considered. SM 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, SM is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for SM is better on when it is viewed on short interest.