Earnings

Uncovering the next great stocks: Fiat Chrysler Automobiles N.V. (FCAU), MBIA Inc. (MBI)

The shares of Fiat Chrysler Automobiles N.V. have increased by more than 26.40% this year alone. The shares recently went down by -0.66% or -$0.15 and now trades at $22.55. The shares of MBIA Inc. (NYSE:MBI), has jumped by 21.04% year to date as of 05/14/2018. The shares currently trade at $8.86 and have been able to report a change of 2.31% over the past one week.

The stock of Fiat Chrysler Automobiles N.V. and MBIA 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: 20.11% versus 10.00%

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 FCAU will grow it’s earning at a 20.11% annual rate in the next 5 years. This is in contrast to MBI which will have a positive growth at a 10.00% annual rate. This means that the higher growth rate of FCAU 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. These figures suggest that FCAU ventures generate a higher ROI than that of MBI.

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, FCAU’s free cash flow per share is a positive 0.98, while that of MBI is negative -0.02.

Valuation

FCAU currently trades at a forward P/E of 5.20, a P/B of 1.36, and a P/S of 0.25 while MBI trades at a P/B of 0.63, and a P/S of 1.44. This means that looking at the earnings, book values and sales basis, FCAU 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 FCAU is currently at a -31.91% to its one-year price target of 33.12. Looking at its rival pricing, MBI is at a -21.24% relative to its price target of 11.25.




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), FCAU is given a 2.00 while 2.40 placed for MBI. This means that analysts are more bullish on the outlook for MBI 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 FCAU is 4.77 while that of MBI is just 16.76. This means that analysts are more bullish on the forecast for FCAU stock.

Conclusion

The stock of MBIA Inc. defeats that of Fiat Chrysler Automobiles N.V. when the two are compared, with MBI taking 2 out of the total factors that were been considered. MBI 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, MBI is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for MBI is better on when it is viewed on short interest.

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