The shares of Progress Software Corporation have increased by more than 18.75% this year alone. The shares recently went up by 15.75% or $6.88 and now trades at $50.55. The shares of Sea Limited (NYSE:SE), has jumped by 6.75% year to date as of 01/11/2018. The shares currently trade at $14.23 and have been able to report a change of 9.46% over the past one week.
The stock of Progress Software Corporation and Sea Limited were two of the most active stocks on Thursday. 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: 10.00% versus 11.25%
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 PRGS will grow it’s earning at a 10.00% annual rate in the next 5 years. This is in contrast to SE which will have a positive growth at a 11.25% annual rate. This means that the higher growth rate of SE 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. PRGS has an EBITDA margin of 4.83%, this implies that the underlying business of SE is more profitable. The ROI of PRGS is -9.30% while that of SE is 172.80%. These figures suggest that SE ventures generate a higher ROI than that of PRGS.
The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, PRGS’s free cash flow per share is a 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 PRGS is 1.30 and that of SE is 1.90. This implies that it is easier for PRGS to cover its immediate obligations over the next 12 months than SE.
PRGS currently trades at a forward P/E of 26.85, a P/B of 6.20, and a P/S of 6.00 while SE trades at a P/S of 11.52. This means that looking at the earnings, book values and sales basis, PRGS 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 PRGS is currently at a 21.31% to its one-year price target of 41.67. Looking at its rival pricing, SE is at a -67.29% relative to its price target of 43.50. This figure implies that over the next one year, SE 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), PRGS is given a 2.80 while 2.70 placed for SE. This means that analysts are more bullish on the outlook for PRGS 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 PRGS is 2.39 while that of SE is just 2.65. This means that analysts are more bullish on the forecast for PRGS stock.
The stock of Progress Software Corporation defeats that of Sea Limited when the two are compared, with PRGS taking 3 out of the total factors that were been considered. PRGS 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, PRGS is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for PRGS is better on when it is viewed on short interest.