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Choosing Between Hot Stocks: Esperion Therapeutics, Inc. (ESPR), EP Energy Corporation (EPE)

The shares of Esperion Therapeutics, Inc. have increased by more than 324.44% this year alone. The shares recently went down by -9.39% or -$5.51 and now trades at $53.14. The shares of EP Energy Corporation (NYSE:EPE), has slumped by -75.57% year to date as of 12/05/2017. The shares currently trade at $1.60 and have been able to report a change of -11.11% over the past one week.

The stock of Esperion Therapeutics, Inc. and EP Energy Corporation were two of the most active stocks on Tueday. 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. These figures suggest that EPE ventures generate a higher ROI than that of ESPR.



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 ESPR is 5.90 and that of EPE is 0.70. This implies that it is easier for ESPR to cover its immediate obligations over the next 12 months than EPE. The debt ratio of ESPR is 0.01 compared to 8.05 for EPE. EPE can be able to settle its long-term debts and thus is a lower financial risk than ESPR.

Valuation




ESPR currently trades at a P/B of 4.65, while EPE trades at a P/B of 0.80, and a P/S of 0.40. This means that looking at the earnings, book values and sales basis, ESPR 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 ESPR is currently at a -19.18% to its one-year price target of 65.75. Looking at its rival pricing, EPE is at a -97.22% relative to its price target of 57.50. This figure implies that over the next one year, EPE 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), ESPR is given a 1.90 while 2.60 placed for EPE. This means that analysts are more bullish on the outlook for EPE 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 ESPR is 7.88 while that of EPE is just 12.47. This means that analysts are more bullish on the forecast for ESPR stock.

Conclusion

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

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