Earnings

A Comparison of Top Movers: Outfront Media Inc. (OUT), Fortinet, Inc. (FTNT)

The shares of Outfront Media Inc. have decreased by more than -13.66% this year alone. The shares recently went up by 0.15% or $0.03 and now trades at $20.03. The shares of Fortinet, Inc. (NASDAQ:FTNT), has jumped by 44.86% year to date as of 06/06/2018. The shares currently trade at $63.29 and have been able to report a change of 3.45% over the past one week.

The stock of Outfront Media Inc. and Fortinet, 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.

Next 5Y EPS Growth: 3.45% versus 23.75%

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 OUT will grow it’s earning at a 3.45% annual rate in the next 5 years. This is in contrast to FTNT which will have a positive growth at a 23.75% annual rate. This means that the higher growth rate of FTNT 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. OUT has an EBITDA margin of 28.76%, this implies that the underlying business of OUT is more profitable. The ROI of OUT is 7.30% while that of FTNT is 13.60%. These figures suggest that FTNT ventures generate a higher ROI than that of OUT.

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, OUT’s free cash flow per share is a negative -0.37, while that of FTNT is positive 8.44.

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 OUT is 1.20 and that of FTNT is 1.70. This implies that it is easier for OUT to cover its immediate obligations over the next 12 months than FTNT. The debt ratio of OUT is 1.99 compared to 0.00 for FTNT. OUT can be able to settle its long-term debts and thus is a lower financial risk than FTNT.

Valuation

OUT currently trades at a forward P/E of 17.69, a P/B of 2.46, and a P/S of 1.82 while FTNT trades at a forward P/E of 35.98, a P/B of 15.29, and a P/S of 6.76. This means that looking at the earnings, book values and sales basis, OUT 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 OUT is currently at a -18.94% to its one-year price target of 24.71. Looking at its rival pricing, FTNT is at a 7.54% relative to its price target of 58.85.

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), OUT is given a 2.10 while 2.40 placed for FTNT. This means that analysts are more bullish on the outlook for FTNT 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 OUT is 1.90 while that of FTNT is just 3.23. This means that analysts are more bullish on the forecast for OUT stock.

Conclusion

The stock of Outfront Media Inc. defeats that of Fortinet, Inc. when the two are compared, with OUT taking 7 out of the total factors that were been considered. OUT 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, OUT is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for OUT is better on when it is viewed on short interest.

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