Earnings

Comparing Valuation And Performance: Peabody Energy Corporation (BTU), Deckers Outdoor Corporation (DECK)

The shares of Peabody Energy Corporation have increased by more than 16.46% this year alone. The shares recently went down by -1.21% or -$0.56 and now trades at $45.85. The shares of Deckers Outdoor Corporation (NYSE:DECK), has jumped by 48.70% year to date as of 06/13/2018. The shares currently trade at $119.33 and have been able to report a change of -0.43% over the past one week.

The stock of Peabody Energy Corporation and Deckers Outdoor Corporation 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. BTU has an EBITDA margin of 0.58%, this implies that the underlying business of DECK is more profitable. The ROI of BTU is 25.30% while that of DECK is 19.30%. These figures suggest that BTU ventures generate a higher ROI than that of DECK.

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, BTU’s free cash flow per share is a positive 7.83.

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 BTU is 2.20 and that of DECK is 4.80. This implies that it is easier for BTU to cover its immediate obligations over the next 12 months than DECK. The debt ratio of BTU is 0.40 compared to 0.03 for DECK. BTU can be able to settle its long-term debts and thus is a lower financial risk than DECK.

Valuation

BTU currently trades at a forward P/E of 24.36, a P/B of 1.54, and a P/S of 1.01 while DECK trades at a forward P/E of 17.36, a P/B of 3.95, and a P/S of 1.96. This means that looking at the earnings, book values and sales basis, BTU 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 BTU is currently at a -8.3% to its one-year price target of 50.00. Looking at its rival pricing, DECK is at a 10.17% relative to its price target of 108.31.




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), BTU is given a 2.00 while 2.80 placed for DECK. This means that analysts are more bullish on the outlook for DECK 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 BTU is 2.20 while that of DECK is just 5.11. This means that analysts are more bullish on the forecast for BTU stock.

Conclusion

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

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