Earnings

Reliable Long-term Trend to Profit From: OGE Energy Corp. (OGE), UDR, Inc. (UDR)

The shares of OGE Energy Corp. have increased by more than 3.56% this year alone. The shares recently went up by 1.28% or $0.43 and now trades at $34.08. The shares of UDR, Inc. (NYSE:UDR), has slumped by -7.58% year to date as of 05/23/2018. The shares currently trade at $35.60 and have been able to report a change of 1.71% over the past one week.

The stock of OGE Energy Corp. and UDR, Inc. were two of the most active stocks on Wednesday. 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. OGE has an EBITDA margin of 39.39%, this implies that the underlying business of UDR is more profitable. The ROI of OGE is 4.50% while that of UDR is 2.80%. These figures suggest that OGE ventures generate a higher ROI than that of UDR.

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, OGE’s free cash flow per share is a negative -1.59.

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 debt ratio of OGE is 0.83 compared to 1.30 for UDR. UDR can be able to settle its long-term debts and thus is a lower financial risk than OGE.

Valuation

OGE currently trades at a forward P/E of 16.17, a P/B of 1.77, and a P/S of 2.96 while UDR trades at a forward P/E of 126.24, a P/B of 3.36, and a P/S of 9.49. This means that looking at the earnings, book values and sales basis, OGE 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 OGE is currently at a -3.1% to its one-year price target of 35.17. Looking at its rival pricing, UDR is at a -7.39% relative to its price target of 38.44.




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), OGE is given a 2.10 while 2.80 placed for UDR. This means that analysts are more bullish on the outlook for UDR 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 OGE is 1.92 while that of UDR is just 3.90. This means that analysts are more bullish on the forecast for OGE stock.

Conclusion

The stock of UDR, Inc. defeats that of OGE Energy Corp. when the two are compared, with UDR taking 5 out of the total factors that were been considered. UDR 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, UDR is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for UDR is better on when it is viewed on short interest.

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