The shares of Monsanto Company have increased by more than 9.56% this year alone. The shares recently went up by 0.02% or $0.02 and now trades at $127.95. The shares of Fortune Brands Home & Security, Inc. (NYSE:FBHS), has slumped by -15.37% year to date as of 06/06/2018. The shares currently trade at $57.92 and have been able to report a change of 0.87% over the past one week.
The stock of Monsanto Company and Fortune Brands Home & Security, 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: 8.00% versus 10.65%
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 MON will grow it’s earning at a 8.00% annual rate in the next 5 years. This is in contrast to FBHS which will have a positive growth at a 10.65% annual rate. This means that the higher growth rate of FBHS 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. MON has an EBITDA margin of 28.79%, this implies that the underlying business of MON is more profitable. The ROI of MON is 17.80% while that of FBHS is 12.20%. These figures suggest that MON ventures generate a higher ROI than that of FBHS.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, MON’s free cash flow per share is a negative -0.96, while that of FBHS is also a negative -2.15.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 MON is 1.40 and that of FBHS is 1.40. This implies that it is easier for MON to cover its immediate obligations over the next 12 months than FBHS. The debt ratio of MON is 1.01 compared to 0.80 for FBHS. MON can be able to settle its long-term debts and thus is a lower financial risk than FBHS.Valuation
MON currently trades at a forward P/E of 20.88, a P/B of 7.28, and a P/S of 3.87 while FBHS trades at a forward P/E of 14.15, a P/B of 3.68, and a P/S of 1.62. This means that looking at the earnings, book values and sales basis, FBHS 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 MON is currently at a 1.23% to its one-year price target of 126.40. Looking at its rival pricing, FBHS is at a -13.81% relative to its price target of 67.20.
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), MON is given a 2.90 while 2.40 placed for FBHS. This means that analysts are more bullish on the outlook for MON 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 MON is 1.64 while that of FBHS is just 3.09. This means that analysts are more bullish on the forecast for MON stock.
The stock of Monsanto Company defeats that of Fortune Brands Home & Security, Inc. when the two are compared, with MON taking 7 out of the total factors that were been considered. MON 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, MON is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for MON is better on when it is viewed on short interest.