The shares of Dean Foods Company have decreased by more than -30.45% this year alone. The shares recently went down by -15.10% or -$1.43 and now trades at $8.04. The shares of Earthstone Energy, Inc. (NYSE:ESTE), has slumped by -21.45% year to date as of 08/07/2018. The shares currently trade at $8.35 and have been able to report a change of -14.27% over the past one week.
The stock of Dean Foods Company and Earthstone Energy, Inc. were two of the most active stocks on Tuesday. 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: 5.66% versus 30.00%
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 DF will grow it’s earning at a 5.66% annual rate in the next 5 years. This is in contrast to ESTE which will have a positive growth at a 30.00% annual rate. This means that the higher growth rate of ESTE 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. DF has an EBITDA margin of 3.4%, this implies that the underlying business of ESTE is more profitable. The ROI of DF is 4.20% while that of ESTE is -8.40%. These figures suggest that DF ventures generate a higher ROI than that of ESTE.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, DF’s free cash flow per share is a positive 0.19, while that of ESTE is negative -0.04.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 DF is 1.60 and that of ESTE is 0.80. This implies that it is easier for DF to cover its immediate obligations over the next 12 months than ESTE. The debt ratio of DF is 1.39 compared to 0.00 for ESTE. DF can be able to settle its long-term debts and thus is a lower financial risk than ESTE.Valuation
DF currently trades at a forward P/E of 10.24, a P/B of 1.13, and a P/S of 0.09 while ESTE trades at a forward P/E of 6.03, a P/B of 0.80, and a P/S of 4.04. This means that looking at the earnings, book values and sales basis, DF 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 DF is currently at a -18.38% to its one-year price target of 9.85. Looking at its rival pricing, ESTE is at a -44.03% relative to its price target of 14.92.
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), DF is given a 3.20 while 1.70 placed for ESTE. This means that analysts are more bullish on the outlook for DF 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 DF is 11.04 while that of ESTE is just 3.27. This means that analysts are more bullish on the forecast for ESTE stock.
The stock of Dean Foods Company defeats that of Earthstone Energy, Inc. when the two are compared, with DF taking 6 out of the total factors that were been considered. DF 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, DF is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for DF is better on when it is viewed on short interest.