Earnings

Which of 2 stocks would appeal to long-term investors? Qudian Inc. (QD), EV Energy Partners, L.P. (EVEP)

The shares of Qudian Inc. have decreased by more than -18.50% this year alone. The shares recently went down by -2.29% or -$0.24 and now trades at $10.22. The shares of EV Energy Partners, L.P. (NASDAQ:EVEP), has slumped by -70.20% year to date as of 04/16/2018. The shares currently trade at $0.15 and have been able to report a change of -5.35% over the past one week.

The stock of Qudian Inc. and EV Energy Partners, L.P. 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. QD has an EBITDA margin of 50.8%, this implies that the underlying business of QD is more profitable. The ROI of QD is 12.00% while that of EVEP is -9.40%. These figures suggest that QD ventures generate a higher ROI than that of EVEP.

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, QD’s free cash flow per share is a positive 0, while that of EVEP is negative -0.01.

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 QD is 2.10 and that of EVEP is 0.10. This implies that it is easier for QD to cover its immediate obligations over the next 12 months than EVEP. The debt ratio of QD is 0.89 compared to 0.93 for EVEP. EVEP can be able to settle its long-term debts and thus is a lower financial risk than QD.

Valuation

QD currently trades at a forward P/E of 5.67, a P/B of 2.19, and a P/S of 4.39 while EVEP trades at a P/B of 0.01, and a P/S of 0.03. This means that looking at the earnings, book values and sales basis, QD 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 QD is currently at a -53.69% to its one-year price target of 22.07.




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), QD is given a 1.90 while 5.00 placed for EVEP. This means that analysts are more bullish on the outlook for EVEP stocks.

Conclusion

The stock of EV Energy Partners, L.P. defeats that of Qudian Inc. when the two are compared, with EVEP taking 3 out of the total factors that were been considered. EVEP 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, EVEP is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for EVEP is better on when it is viewed on short interest.

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