The shares of Masco Corporation have decreased by more than -14.34% this year alone. The shares recently went down by -1.13% or -$0.43 and now trades at $37.64. The shares of Zayo Group Holdings, Inc. (NYSE:ZAYO), has slumped by -8.45% year to date as of 05/14/2018. The shares currently trade at $33.69 and have been able to report a change of -2.85% over the past one week.
The stock of Masco Corporation and Zayo Group Holdings, 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: 19.09% versus 46.68%
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 MAS will grow it’s earning at a 19.09% annual rate in the next 5 years. This is in contrast to ZAYO which will have a positive growth at a 46.68% annual rate. This means that the higher growth rate of ZAYO 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. MAS has an EBITDA margin of 16.37%, this implies that the underlying business of ZAYO is more profitable. The ROI of MAS is 27.40% while that of ZAYO is 4.80%. These figures suggest that MAS ventures generate a higher ROI than that of ZAYO.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, MAS’s free cash flow per share is a negative -1.67, while that of ZAYO is positive 3.05.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 MAS is 1.70 and that of ZAYO is 1.10. This implies that it is easier for MAS to cover its immediate obligations over the next 12 months than ZAYO.Valuation
MAS currently trades at a forward P/E of 13.00, and a P/S of 1.50 while ZAYO trades at a forward P/E of 73.72, a P/B of 5.43, and a P/S of 3.24. This means that looking at the earnings, book values and sales basis, MAS 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 MAS is currently at a -18.07% to its one-year price target of 45.94. Looking at its rival pricing, ZAYO is at a -20.03% relative to its price target of 42.13.
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), MAS is given a 2.10 while 1.90 placed for ZAYO. This means that analysts are more bullish on the outlook for MAS 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 MAS is 2.03 while that of ZAYO is just 6.48. This means that analysts are more bullish on the forecast for MAS stock.
The stock of Masco Corporation defeats that of Zayo Group Holdings, Inc. when the two are compared, with MAS taking 7 out of the total factors that were been considered. MAS 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, MAS is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for MAS is better on when it is viewed on short interest.