Comparing Valuation And Performance: Mallinckrodt Public Limited Company (MNK), RAIT Financial Trust (RAS)

The shares of Mallinckrodt Public Limited Company have decreased by more than -38.43% this year alone. The shares recently went down by -6.78% or -$1.01 and now trades at $13.89. The shares of RAIT Financial Trust (NYSE:RAS), has slumped by -48.40% year to date as of 04/12/2018. The shares currently trade at $0.19 and have been able to report a change of 13.82% over the past one week.

The stock of Mallinckrodt Public Limited Company and RAIT Financial Trust were two of the most active stocks on Thuday. 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: 1.43% versus -8.00%

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 MNK will grow it’s earning at a 1.43% annual rate in the next 5 years. This is in contrast to RAS which will have a positive growth at a -8.00% annual rate. This means that the higher growth rate of MNK 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. MNK has an EBITDA margin of 32.05%, this implies that the underlying business of MNK is more profitable. The ROI of MNK is 12.60% while that of RAS is -11.90%. These figures suggest that MNK ventures generate a higher ROI than that of RAS.

Cash Flow

The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, MNK’s free cash flow per share is a positive 7.08.

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 debt ratio of MNK is 1.03 compared to 7.89 for RAS. RAS can be able to settle its long-term debts and thus is a lower financial risk than MNK.


MNK currently trades at a forward P/E of 1.99, a P/B of 0.20, and a P/S of 0.38 while RAS trades at a P/B of 0.10, and a P/S of 0.12. This means that looking at the earnings, book values and sales basis, MNK 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 MNK is currently at a -49.64% to its one-year price target of 27.58.

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), MNK is given a 2.80 while 3.00 placed for RAS. This means that analysts are more bullish on the outlook for RAS 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 MNK is 8.34 while that of RAS is just 1.29. This means that analysts are more bullish on the forecast for RAS stock.


The stock of RAIT Financial Trust defeats that of Mallinckrodt Public Limited Company when the two are compared, with RAS taking 4 out of the total factors that were been considered. RAS 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, RAS is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for RAS is better on when it is viewed on short interest.

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