Earnings

Uncovering the next great stocks: Masco Corporation (MAS), NOW Inc. (DNOW)

The shares of Masco Corporation have decreased by more than -13.72% this year alone. The shares recently went up by 1.50% or $0.56 and now trades at $37.91. The shares of NOW Inc. (NYSE:DNOW), has jumped by 34.36% year to date as of 05/16/2018. The shares currently trade at $14.82 and have been able to report a change of 3.13% over the past one week.

The stock of Masco Corporation and NOW 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. MAS has an EBITDA margin of 16.37%, this implies that the underlying business of MAS is more profitable. The ROI of MAS is 27.40% while that of DNOW is -0.60%. These figures suggest that MAS ventures generate a higher ROI than that of DNOW.

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, MAS’s free cash flow per share is a negative -1.67, while that of DNOW is also a negative -1.18.

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 MAS is 1.70 and that of DNOW is 2.70. This implies that it is easier for MAS to cover its immediate obligations over the next 12 months than DNOW.

Valuation

MAS currently trades at a forward P/E of 13.09, and a P/S of 1.51 while DNOW trades at a forward P/E of 30.43, a P/B of 1.34, and a P/S of 0.58. This means that looking at the earnings, book values and sales basis, MAS 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 MAS is currently at a -17.48% to its one-year price target of 45.94. Looking at its rival pricing, DNOW is at a 20.49% relative to its price target of 12.30.




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), MAS is given a 2.10 while 2.50 placed for DNOW. This means that analysts are more bullish on the outlook for DNOW 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 MAS is 1.99 while that of DNOW is just 11.69. This means that analysts are more bullish on the forecast for MAS stock.

Conclusion

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

Previous ArticleNext Article

Related Post

Critical Comparison: DowDuPont Inc. (DWDP) vs. Rep... DowDuPont Inc. (NYSE:DWDP) shares are down more than -3.45% this year and recently decreased -2.19% or -$1.54 to settle at $68.76. Republic Services, ...
Choosing Between First Defiance Financial Corp. (F... First Defiance Financial Corp. (NASDAQ:FDEF) shares are up more than 1.98% this year and recently increased 0.49% or $0.26 to settle at $53.00. Home B...
Live Nation Entertainment, Inc. (LYV) vs. Enel Ame... Live Nation Entertainment, Inc. (NYSE:LYV) and Enel Americas S.A. (NYSE:ENIA) are the two most active stocks in the Entertainment - Diversified indust...
Dissecting the Numbers for Activision Blizzard, In... Activision Blizzard, Inc. (NASDAQ:ATVI) shares are up more than 16.88% this year and recently increased 2.78% or $2 to settle at $74.01. Valero Energy...
Choosing Between Hot Stocks: Ocwen Financial Corpo... The shares of Ocwen Financial Corporation have increased by more than 45.37% this year alone. The shares recently went up by 4.84% or $0.21 and now tr...