Earnings

Uncovering the next great stocks: PayPal Holdings, Inc. (PYPL), Colony NorthStar, Inc. (CLNS)

The shares of PayPal Holdings, Inc. have increased by more than 5.70% this year alone. The shares recently went up by 0.04% or $0.03 and now trades at $77.82. The shares of Colony NorthStar, Inc. (NYSE:CLNS), has slumped by -47.41% year to date as of 05/16/2018. The shares currently trade at $6.00 and have been able to report a change of -5.51% over the past one week.

The stock of PayPal Holdings, Inc. and Colony NorthStar, 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. PYPL has an EBITDA margin of 22.58%, this implies that the underlying business of CLNS is more profitable. The ROI of PYPL is 11.20% while that of CLNS is -0.40%. These figures suggest that PYPL ventures generate a higher ROI than that of CLNS.

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, PYPL’s free cash flow per share is a negative -3.9, while that of CLNS is also a negative -2.9.

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 debt ratio of PYPL is 0.20 compared to 1.64 for CLNS. CLNS can be able to settle its long-term debts and thus is a lower financial risk than PYPL.

Valuation

PYPL currently trades at a forward P/E of 27.63, a P/B of 6.34, and a P/S of 6.51 while CLNS trades at a P/B of 0.50, and a P/S of 1.13. This means that looking at the earnings, book values and sales basis, PYPL 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 PYPL is currently at a -8.5% to its one-year price target of 85.05. Looking at its rival pricing, CLNS is at a -30.23% relative to its price target of 8.60.




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), PYPL is given a 2.00 while 2.00 placed for CLNS. This means that analysts are equally bullish on their outlook for the two stocks 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 PYPL is 1.65 while that of CLNS is just 3.48. This means that analysts are more bullish on the forecast for PYPL stock.

Conclusion

The stock of PayPal Holdings, Inc. defeats that of Colony NorthStar, Inc. when the two are compared, with PYPL taking 6 out of the total factors that were been considered. PYPL 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, PYPL is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for PYPL is better on when it is viewed on short interest.

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