The shares of Hewlett Packard Enterprise Company have increased by more than 4.78% this year alone. The shares recently went up by 3.00% or $0.41 and now trades at $14.09. The shares of Accuray Incorporated (NASDAQ:ARAY), has jumped by 9.78% year to date as of 11/20/2017. The shares currently trade at $5.05 and have been able to report a change of 12.22% over the past one week.
The stock of Hewlett Packard Enterprise Company and Accuray Incorporated were two of the most active stocks on Monday. 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. HPE has an EBITDA margin of 11.98%, this implies that the underlying business of HPE is more profitable. The ROI of HPE is 7.50% while that of ARAY is -5.10%. These figures suggest that HPE ventures generate a higher ROI than that of ARAY.
The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, HPE’s free cash flow per share is a positive 0.13, while that of ARAY is positive -0.
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 HPE is 1.30 and that of ARAY is 1.50. This implies that it is easier for HPE to cover its immediate obligations over the next 12 months than ARAY. The debt ratio of HPE is 0.57 compared to 3.25 for ARAY. ARAY can be able to settle its long-term debts and thus is a lower financial risk than HPE.
HPE currently trades at a forward P/E of 11.78, a P/B of 0.80, and a P/S of 0.65 while ARAY trades at a forward P/B of 8.71, and a P/S of 1.11. This means that looking at the earnings, book values and sales basis, HPE 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 HPE is currently at a -8.27% to its one-year price target of 15.36. Looking at its rival pricing, ARAY is at a -15.83% relative to its price target of 6.00. This figure implies that over the next one year, ARAY is a better investment.
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), HPE is given a 2.70 while 2.80 placed for ARAY. This means that analysts are more bullish on the outlook for ARAY 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 HPE is 3.22 while that of ARAY is just 9.04. This means that analysts are more bullish on the forecast for HPE stock.
The stock of Accuray Incorporated defeats that of Hewlett Packard Enterprise Company when the two are compared, with ARAY taking 4 out of the total factors that were been considered. ARAY 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, ARAY is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for ARAY is better on when it is viewed on short interest.