The shares of Northern Oil and Gas, Inc. have increased by more than 40.98% this year alone. The shares recently went up by 14.23% or $0.36 and now trades at $2.89. The shares of Sunrun Inc. (NASDAQ:RUN), has jumped by 6.78% year to date as of 01/11/2018. The shares currently trade at $6.30 and have been able to report a change of 3.96% over the past one week.
The stock of Northern Oil and Gas, Inc. and Sunrun Inc. 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: 5.00% versus 19.50%
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 NOG will grow it’s earning at a 5.00% annual rate in the next 5 years. This is in contrast to RUN which will have a positive growth at a 19.50% annual rate. This means that the higher growth rate of RUN 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. NOG has an EBITDA margin of 34.01%, this implies that the underlying business of NOG is more profitable. The ROI of NOG is -66.00% while that of RUN is -14.40%. These figures suggest that RUN ventures generate a higher ROI than that of NOG.
The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, NOG’s free cash flow per share is a positive 0, while that of RUN is negative -0.05.
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 NOG is 0.20 and that of RUN is 0.70. This implies that it is easier for NOG to cover its immediate obligations over the next 12 months than RUN.
NOG currently trades at a forward P/E of 24.08, and a P/S of 0.97 while RUN trades at a forward P/E of 3.98, a P/B of 0.88, and a P/S of 1.35. This means that looking at the earnings, book values and sales basis, NOG 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 NOG is currently at a 21.43% to its one-year price target of 2.38. Looking at its rival pricing, RUN is at a -38.78% relative to its price target of 10.29. This figure implies that over the next one year, RUN 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), NOG is given a 3.30 while 1.70 placed for RUN. This means that analysts are more bullish on the outlook for NOG 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 NOG is 3.25 while that of RUN is just 17.26. This means that analysts are more bullish on the forecast for NOG stock.
The stock of Northern Oil and Gas, Inc. defeats that of Sunrun Inc. when the two are compared, with NOG taking 7 out of the total factors that were been considered. NOG 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, NOG is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for NOG is better on when it is viewed on short interest.