The shares of Teradata Corporation have increased by more than 1.04% this year alone. The shares recently went up by 2.21% or $0.84 and now trades at $38.86. The shares of Ulta Beauty, Inc. (NASDAQ:ULTA), has jumped by 15.17% year to date as of 05/17/2018. The shares currently trade at $257.60 and have been able to report a change of 4.08% over the past one week.
The stock of Teradata Corporation and Ulta Beauty, Inc. were two of the most active stocks on Thuday. 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: 9.85% versus 19.99%
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 TDC will grow it’s earning at a 9.85% annual rate in the next 5 years. This is in contrast to ULTA which will have a positive growth at a 19.99% annual rate. This means that the higher growth rate of ULTA 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. TDC has an EBITDA margin of 9.44%, this implies that the underlying business of ULTA is more profitable. The ROI of TDC is 4.50% while that of ULTA is 33.40%. These figures suggest that ULTA ventures generate a higher ROI than that of TDC.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, TDC’s free cash flow per share is a positive 7.32, while that of ULTA is positive 5.82.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 TDC is 1.70 and that of ULTA is 2.60. This implies that it is easier for TDC to cover its immediate obligations over the next 12 months than ULTA. The debt ratio of TDC is 0.81 compared to 0.00 for ULTA. TDC can be able to settle its long-term debts and thus is a lower financial risk than ULTA.Valuation
TDC currently trades at a forward P/E of 22.71, a P/B of 7.33, and a P/S of 2.17 while ULTA trades at a forward P/E of 20.30, a P/B of 8.84, and a P/S of 2.64. This means that looking at the earnings, book values and sales basis, TDC 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 TDC is currently at a 5.03% to its one-year price target of 37.00. Looking at its rival pricing, ULTA is at a 2.92% relative to its price target of 250.30.
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), TDC is given a 3.10 while 2.10 placed for ULTA. This means that analysts are more bullish on the outlook for TDC 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 TDC is 12.78 while that of ULTA is just 2.07. This means that analysts are more bullish on the forecast for ULTA stock.
The stock of Teradata Corporation defeats that of Ulta Beauty, Inc. when the two are compared, with TDC taking 3 out of the total factors that were been considered. TDC 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, TDC is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for TDC is better on when it is viewed on short interest.