Earnings

Which of these 2 stocks can turn out to be absolute gem? – Celanese Corporation (CE), Weight Watchers International, Inc. (WTW)

The shares of Celanese Corporation have decreased by more than -0.62% this year alone. The shares recently went up by 2.17% or $2.26 and now trades at $106.42. The shares of Weight Watchers International, Inc. (NYSE:WTW), has jumped by 47.65% year to date as of 04/16/2018. The shares currently trade at $65.38 and have been able to report a change of 8.68% over the past one week.

The stock of Celanese Corporation and Weight Watchers International, 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. CE has an EBITDA margin of 24.54%, this implies that the underlying business of CE is more profitable. The ROI of CE is 11.90% while that of WTW is 25.10%. These figures suggest that WTW ventures generate a higher ROI than that of CE.

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, CE’s free cash flow per share is a negative -1.48, while that of WTW is positive 2.48.

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 CE is 1.80 and that of WTW is 0.60. This implies that it is easier for CE to cover its immediate obligations over the next 12 months than WTW.

Valuation

CE currently trades at a forward P/E of 11.41, a P/B of 5.01, and a P/S of 2.36 while WTW trades at a forward P/E of 19.05, and a P/S of 3.27. This means that looking at the earnings, book values and sales basis, CE 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 CE is currently at a -10.53% to its one-year price target of 118.95. Looking at its rival pricing, WTW is at a -30.2% relative to its price target of 93.67.




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), CE is given a 2.20 while 2.00 placed for WTW. This means that analysts are more bullish on the outlook for CE 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 CE is 1.20 while that of WTW is just 3.43. This means that analysts are more bullish on the forecast for CE stock.

Conclusion

The stock of Celanese Corporation defeats that of Weight Watchers International, Inc. when the two are compared, with CE taking 7 out of the total factors that were been considered. CE 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, CE is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for CE is better on when it is viewed on short interest.

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