The shares of California Resources Corporation have decreased by more than -21.32% this year alone. The shares recently went down by -9.16% or -$1.69 and now trades at $16.75. The shares of Iconix Brand Group, Inc. (NASDAQ:ICON), has slumped by -83.40% year to date as of 12/05/2017. The shares currently trade at $1.55 and have been able to report a change of -11.93% over the past one week.
The stock of California Resources Corporation and Iconix Brand Group, Inc. 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.
Next 5Y EPS Growth: -11.60% 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 CRC will grow it’s earning at a -11.60% annual rate in the next 5 years. This is in contrast to ICON which will have a positive growth at a 15.00% annual rate. This means that the higher growth rate of ICON 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. CRC has an EBITDA margin of 42.99%, this implies that the underlying business of CRC is more profitable. The ROI of CRC is 16.60% while that of ICON is -10.60%. These figures suggest that CRC ventures generate a higher ROI than that of ICON.
The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, CRC’s free cash flow per share is a positive 0.39.
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 CRC is 0.60 and that of ICON is 1.00. This implies that it is easier for CRC to cover its immediate obligations over the next 12 months than ICON.
CRC currently trades at a P/S of 0.35 while ICON trades at a forward P/E of 2.54, a P/B of 0.20, and a P/S of 0.28. This means that looking at the earnings, book values and sales basis, ICON 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 CRC is currently at a 8.55% to its one-year price target of 15.43. Looking at its rival pricing, ICON is at a -22.5% relative to its price target of 2.00. This figure implies that over the next one year, ICON 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), CRC is given a 3.00 while 3.00 placed for ICON. This means that analysts are equally bullish on their outlook for the two stocks 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 CRC is 8.89 while that of ICON is just 4.63. This means that analysts are more bullish on the forecast for ICON stock.
The stock of Iconix Brand Group, Inc. defeats that of California Resources Corporation when the two are compared, with ICON taking 5 out of the total factors that were been considered. ICON 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, ICON is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for ICON is better on when it is viewed on short interest.