The shares of Pitney Bowes Inc. have increased by more than 19.50% this year alone. The shares recently went up by 14.88% or $1.73 and now trades at $13.36. The shares of Wabash National Corporation (NYSE:WNC), has jumped by 3.59% year to date as of 01/11/2018. The shares currently trade at $22.48 and have been able to report a change of 4.90% over the past one week.
The stock of Pitney Bowes Inc. and Wabash National Corporation 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: 4.00% 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 PBI will grow it’s earning at a 4.00% annual rate in the next 5 years. This is in contrast to WNC which will have a positive growth at a 15.00% annual rate. This means that the higher growth rate of WNC 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. PBI has an EBITDA margin of 13.69%, this implies that the underlying business of PBI is more profitable. The ROI of PBI is 6.30% while that of WNC is 19.20%. These figures suggest that WNC ventures generate a higher ROI than that of PBI.
The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, PBI’s free cash flow per share is a positive 1.97, while that of WNC is negative -1.15.
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 PBI is 1.40 and that of WNC is 2.00. This implies that it is easier for PBI to cover its immediate obligations over the next 12 months than WNC. The debt ratio of PBI is 41.66 compared to 1.13 for WNC. PBI can be able to settle its long-term debts and thus is a lower financial risk than WNC.
PBI currently trades at a forward P/E of 9.50, a P/B of 24.74, and a P/S of 0.74 while WNC trades at a forward P/E of 13.24, a P/B of 2.72, and a P/S of 0.78. This means that looking at the earnings, book values and sales basis, PBI 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 PBI is currently at a -4.57% to its one-year price target of 14.00. Looking at its rival pricing, WNC is at a -1.4% relative to its price target of 22.80. This figure implies that over the next one year, WNC 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), PBI is given a 2.20 while 2.80 placed for WNC. This means that analysts are more bullish on the outlook for WNC 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 PBI is 2.09 while that of WNC is just 19.01. This means that analysts are more bullish on the forecast for PBI stock.
The stock of Wabash National Corporation defeats that of Pitney Bowes Inc. when the two are compared, with WNC taking 5 out of the total factors that were been considered. WNC 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, WNC is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for WNC is better on when it is viewed on short interest.