The shares of Delta Air Lines, Inc. have increased by more than 4.50% this year alone. The shares recently went up by 4.76% or $2.66 and now trades at $58.52. The shares of Cerecor Inc. (NASDAQ:CERC), has slumped by -15.62% year to date as of 01/11/2018. The shares currently trade at $2.70 and have been able to report a change of -15.63% over the past one week.
The stock of Delta Air Lines, Inc. and Cerecor 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.
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. DAL has an EBITDA margin of 19.42%, this implies that the underlying business of CERC is more profitable. The ROI of DAL is 23.90% while that of CERC is -618.50%. These figures suggest that DAL ventures generate a higher ROI than that of CERC.
The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, DAL’s free cash flow per share is a positive 1.21, while that of CERC is positive 2.02.
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 DAL is 0.40 and that of CERC is 5.80. This implies that it is easier for DAL to cover its immediate obligations over the next 12 months than CERC. The debt ratio of DAL is 0.63 compared to 0.00 for CERC. DAL can be able to settle its long-term debts and thus is a lower financial risk than CERC.
DAL currently trades at a forward P/E of 10.22, a P/B of 2.99, and a P/S of 1.04 while CERC trades at a P/B of 2.62, and a P/S of 2.93. This means that looking at the earnings, book values and sales basis, DAL 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. Looking at its rival pricing, CERC is at a 170% relative to its price target of 1.00. This figure implies that over the next one year, CERC is a better investment.
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 DAL is 2.04 while that of CERC is just 1.59. This means that analysts are more bullish on the forecast for CERC stock.
The stock of Delta Air Lines, Inc. defeats that of Cerecor Inc. when the two are compared, with DAL taking 4 out of the total factors that were been considered. DAL 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, DAL is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for DAL is better on when it is viewed on short interest.