The shares of Netflix, Inc. have increased by more than 62.35% this year alone. The shares recently went up by 0.78% or $2.4 and now trades at $311.65. The shares of Tractor Supply Company (NASDAQ:TSCO), has slumped by -21.98% year to date as of 04/13/2018. The shares currently trade at $58.32 and have been able to report a change of -2.31% over the past one week.
The stock of Netflix, Inc. and Tractor Supply Company were two of the most active stocks on Friday. 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: 70.75% versus 14.46%
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 NFLX will grow it’s earning at a 70.75% annual rate in the next 5 years. This is in contrast to TSCO which will have a positive growth at a 14.46% annual rate. This means that the higher growth rate of NFLX 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. NFLX has an EBITDA margin of 6.8%, this implies that the underlying business of TSCO is more profitable. The ROI of NFLX is 9.80% while that of TSCO is 23.50%. These figures suggest that TSCO ventures generate a higher ROI than that of NFLX.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, NFLX’s free cash flow per share is a negative -4.23, while that of TSCO is positive 2.15.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 NFLX is 1.40 and that of TSCO is 1.90. This implies that it is easier for NFLX to cover its immediate obligations over the next 12 months than TSCO. The debt ratio of NFLX is 1.81 compared to 0.33 for TSCO. NFLX can be able to settle its long-term debts and thus is a lower financial risk than TSCO.Valuation
NFLX currently trades at a forward P/E of 72.31, a P/B of 37.68, and a P/S of 11.48 while TSCO trades at a forward P/E of 13.07, a P/B of 5.16, and a P/S of 1.04. This means that looking at the earnings, book values and sales basis, TSCO 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 NFLX is currently at a 8.73% to its one-year price target of 286.62. Looking at its rival pricing, TSCO is at a -24.56% relative to its price target of 77.31.
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), NFLX is given a 2.30 while 2.60 placed for TSCO. This means that analysts are more bullish on the outlook for TSCO 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 NFLX is 1.65 while that of TSCO is just 2.43. This means that analysts are more bullish on the forecast for NFLX stock.
The stock of Netflix, Inc. defeats that of Tractor Supply Company when the two are compared, with NFLX taking 4 out of the total factors that were been considered. NFLX 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, NFLX is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for NFLX is better on when it is viewed on short interest.