The shares of Marathon Oil Corporation have increased by more than 0.12% this year alone. The shares recently went up by 5.48% or $0.88 and now trades at $16.95. The shares of First Majestic Silver Corp. (NYSE:AG), has slumped by -11.13% year to date as of 02/14/2018. The shares currently trade at $5.99 and have been able to report a change of 8.91% over the past one week.
The stock of Marathon Oil Corporation and First Majestic Silver Corp. were two of the most active stocks on Wednesday. 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. MRO has an EBITDA margin of 37.93%, this implies that the underlying business of MRO is more profitable. These figures suggest that AG ventures generate a higher ROI than that of MRO.
The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, MRO’s free cash flow per share is a negative -0.21.
MRO currently trades at a forward P/E of 73.70, a P/B of 1.22, and a P/S of 3.14 while AG trades at a forward P/E of 99.83, a P/B of 1.56, and a P/S of 3.86. This means that looking at the earnings, book values and sales basis, MRO 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 MRO is currently at a -19.44% to its one-year price target of 21.04. Looking at its rival pricing, AG is at a -38.37% relative to its price target of 9.72. This figure implies that over the next one year, AG 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), MRO is given a 2.30 while 2.30 placed for AG. 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 MRO is 1.38 while that of AG is just 5.43. This means that analysts are more bullish on the forecast for MRO stock.
The stock of First Majestic Silver Corp. defeats that of Marathon Oil Corporation when the two are compared, with AG taking 6 out of the total factors that were been considered. AG 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, AG is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for AG is better on when it is viewed on short interest.