Earnings

Set Sail With Kinder Morgan, Inc. (KMI), AMC Networks Inc. (AMCX)

The shares of Kinder Morgan, Inc. have decreased by more than -13.23% this year alone. The shares recently went up by 2.28% or $0.35 and now trades at $15.68. The shares of AMC Networks Inc. (NASDAQ:AMCX), has slumped by -4.33% year to date as of 04/16/2018. The shares currently trade at $51.74 and have been able to report a change of 0.52% over the past one week.

The stock of Kinder Morgan, Inc. and AMC Networks 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.

Next 5Y EPS Growth: 16.00% versus 6.17%

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 KMI will grow it’s earning at a 16.00% annual rate in the next 5 years. This is in contrast to AMCX which will have a positive growth at a 6.17% annual rate. This means that the higher growth rate of KMI 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. KMI has an EBITDA margin of 46.08%, this implies that the underlying business of KMI is more profitable. The ROI of KMI is 0.30% while that of AMCX is 15.30%. These figures suggest that AMCX ventures generate a higher ROI than that of KMI.

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, KMI’s free cash flow per share is a positive 0.97, while that of AMCX is positive 3.25.

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 KMI is 0.40 and that of AMCX is 2.50. This implies that it is easier for KMI to cover its immediate obligations over the next 12 months than AMCX. The debt ratio of KMI is 1.13 compared to 23.20 for AMCX. AMCX can be able to settle its long-term debts and thus is a lower financial risk than KMI.

Valuation

KMI currently trades at a forward P/E of 16.99, a P/B of 1.04, and a P/S of 2.53 while AMCX trades at a forward P/E of 5.99, a P/B of 23.63, and a P/S of 1.13. This means that looking at the earnings, book values and sales basis, KMI 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 KMI is currently at a -27.41% to its one-year price target of 21.60. Looking at its rival pricing, AMCX is at a -12.47% relative to its price target of 59.11.

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), KMI is given a 2.00 while 2.60 placed for AMCX. This means that analysts are more bullish on the outlook for AMCX 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 KMI is 3.05 while that of AMCX is just 11.44. This means that analysts are more bullish on the forecast for KMI stock.

Conclusion

The stock of AMC Networks Inc. defeats that of Kinder Morgan, Inc. when the two are compared, with AMCX taking 6 out of the total factors that were been considered. AMCX 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, AMCX is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for AMCX is better on when it is viewed on short interest.

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