Earnings

Beacon Roofing Supply, Inc. (BECN) is better stock pick than Voya Financial, Inc. (VOYA)

The shares of Voya Financial, Inc. have increased by more than 5.24% this year alone. The shares recently went down by -1.88% or -$1 and now trades at $52.06. The shares of Beacon Roofing Supply, Inc. (NASDAQ:BECN), has slumped by -32.21% year to date as of 06/13/2018. The shares currently trade at $43.22 and have been able to report a change of 1.53% over the past one week.

The stock of Voya Financial, Inc. and Beacon Roofing Supply, 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: 45.40% versus 15.00%

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 VOYA will grow it’s earning at a 45.40% annual rate in the next 5 years. This is in contrast to BECN which will have a positive growth at a 15.00% annual rate. This means that the higher growth rate of VOYA 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. VOYA has an EBITDA margin of 10.7%, this implies that the underlying business of VOYA is more profitable. The ROI of VOYA is 3.30% while that of BECN is 6.00%. These figures suggest that BECN ventures generate a higher ROI than that of VOYA.

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, VOYA’s free cash flow per share is a positive 4.54, while that of BECN is positive 1.45.

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 VOYA is 0.37 compared to 1.66 for BECN. BECN can be able to settle its long-term debts and thus is a lower financial risk than VOYA.

Valuation

VOYA currently trades at a forward P/E of 9.86, a P/B of 0.96, and a P/S of 1.07 while BECN trades at a forward P/E of 9.69, a P/B of 1.65, and a P/S of 0.58. This means that looking at the earnings, book values and sales basis, VOYA 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. Looking at its rival pricing, BECN is at a -27.03% relative to its price target of 59.23.

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 VOYA is 6.86 while that of BECN is just 2.49. This means that analysts are more bullish on the forecast for BECN stock.

Conclusion

The stock of Beacon Roofing Supply, Inc. defeats that of Voya Financial, Inc. when the two are compared, with BECN taking 6 out of the total factors that were been considered. BECN 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, BECN is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for BECN is better on when it is viewed on short interest.

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