Earnings

Are These Stocks A Sure Bet? – Energy Transfer Equity, L.P. (ETE), Overseas Shipholding Group, Inc. (OSG)

The shares of Energy Transfer Equity, L.P. have decreased by more than -11.59% this year alone. The shares recently went up by 3.46% or $0.51 and now trades at $15.26. The shares of Overseas Shipholding Group, Inc. (NYSE:OSG), has jumped by 31.02% year to date as of 04/16/2018. The shares currently trade at $3.59 and have been able to report a change of 22.95% over the past one week.

The stock of Energy Transfer Equity, L.P. and Overseas Shipholding Group, Inc. were two of the most active stocks on Monday. 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. ETE has an EBITDA margin of 12.14%, this implies that the underlying business of OSG is more profitable. The ROI of ETE is 6.20% while that of OSG is 4.90%. These figures suggest that ETE ventures generate a higher ROI than that of OSG.

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, ETE’s free cash flow per share is a negative -3.36.

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 ETE is 1.40 and that of OSG is 3.30. This implies that it is easier for ETE to cover its immediate obligations over the next 12 months than OSG.

Valuation

ETE currently trades at a forward P/E of 7.19, and a P/S of 0.41 while OSG trades at a P/B of 1.01, and a P/S of 0.69. This means that looking at the earnings, book values and sales basis, ETE 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 ETE is currently at a -23.51% to its one-year price target of 19.95. Looking at its rival pricing, OSG is at a -72.38% relative to its price target of 13.00.




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), ETE is given a 1.90 while 3.00 placed for OSG. This means that analysts are more bullish on the outlook for OSG 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 ETE is 4.78 while that of OSG is just 2.39. This means that analysts are more bullish on the forecast for OSG stock.

Conclusion

The stock of Energy Transfer Equity, L.P. defeats that of Overseas Shipholding Group, Inc. when the two are compared, with ETE taking 6 out of the total factors that were been considered. ETE 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, ETE is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for ETE is better on when it is viewed on short interest.

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