Earnings

PagSeguro Digital Ltd. (PAGS) is better stock pick than Diplomat Pharmacy, Inc. (DPLO)

The shares of Diplomat Pharmacy, Inc. have decreased by more than -4.63% this year alone. The shares recently went up by 0.90% or $0.17 and now trades at $19.14. The shares of PagSeguro Digital Ltd. (NYSE:PAGS), has slumped by -2.09% year to date as of 08/09/2018. The shares currently trade at $28.59 and have been able to report a change of 8.50% over the past one week.

The stock of Diplomat Pharmacy, Inc. and PagSeguro Digital Ltd. were two of the most active stocks on Thursday. 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: 16.82% versus 15.25%

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 DPLO will grow it’s earning at a 16.82% annual rate in the next 5 years. This is in contrast to PAGS which will have a positive growth at a 15.25% annual rate. This means that the higher growth rate of DPLO 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. DPLO has an EBITDA margin of 2.52%, this implies that the underlying business of DPLO is more profitable. The ROI of DPLO is 1.20% while that of PAGS is 68.70%. These figures suggest that PAGS ventures generate a higher ROI than that of DPLO.

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, DPLO’s free cash flow per share is a positive 1.09, while that of PAGS is negative -0.02.

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 DPLO is 0.90 and that of PAGS is 2.30. This implies that it is easier for DPLO to cover its immediate obligations over the next 12 months than PAGS. The debt ratio of DPLO is 0.79 compared to 0.00 for PAGS. DPLO can be able to settle its long-term debts and thus is a lower financial risk than PAGS.

Valuation

DPLO currently trades at a forward P/E of 16.86, a P/B of 1.88, and a P/S of 0.29 while PAGS trades at a forward P/E of 22.69, a P/B of 7.17, and a P/S of 11.19. This means that looking at the earnings, book values and sales basis, DPLO 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 DPLO is currently at a -26.38% to its one-year price target of 26.00. Looking at its rival pricing, PAGS is at a -77.75% relative to its price target of 128.49.

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), DPLO is given a 2.40 while 2.60 placed for PAGS. This means that analysts are more bullish on the outlook for PAGS 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 DPLO is 8.37 while that of PAGS is just 3.41. This means that analysts are more bullish on the forecast for PAGS stock.

Conclusion

The stock of PagSeguro Digital Ltd. defeats that of Diplomat Pharmacy, Inc. when the two are compared, with PAGS taking 6 out of the total factors that were been considered. PAGS 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, PAGS is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for PAGS is better on when it is viewed on short interest.

Previous ArticleNext Article

Related Post

Which of these 2 stocks can turn out to be absolut... The shares of Denbury Resources Inc. have increased by more than 140.27% this year alone. The shares recently went up by 1.92% or $0.1 and now trades ...
Uncovering the next great stocks: Walgreens Boots ... The shares of Walgreens Boots Alliance, Inc. have decreased by more than -9.63% this year alone. The shares recently went up by 0.72% or $0.47 and now...
Reliable Long-term Trend to Profit From: Discovery... The shares of Discovery, Inc. have increased by more than 12.42% this year alone. The shares recently went down by -4.07% or -$1.01 and now trades at ...
Comparing Valuation And Performance: Illumina, Inc... The shares of Illumina, Inc. have increased by more than 48.46% this year alone. The shares recently went up by 12.14% or $35.12 and now trades at $32...
Which Market Offer More Value? – Cheniere En... The shares of Cheniere Energy, Inc. have increased by more than 16.64% this year alone. The shares recently went up by 0.87% or $0.54 and now trades a...