Earnings

Taking Tally Of Express Scripts Holding Company (ESRX), Texas Instruments Incorporated (TXN)

The shares of Express Scripts Holding Company have increased by more than 9.62% this year alone. The shares recently went up by 3.73% or $2.94 and now trades at $81.82. The shares of Texas Instruments Incorporated (NASDAQ:TXN), has jumped by 9.48% year to date as of 08/09/2018. The shares currently trade at $114.34 and have been able to report a change of 1.90% over the past one week.

The stock of Express Scripts Holding Company and Texas Instruments Incorporated 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: 8.69% versus 14.41%

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 ESRX will grow it’s earning at a 8.69% annual rate in the next 5 years. This is in contrast to TXN which will have a positive growth at a 14.41% annual rate. This means that the higher growth rate of TXN 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. ESRX has an EBITDA margin of 6.64%, this implies that the underlying business of TXN is more profitable. The ROI of ESRX is 19.00% while that of TXN is 26.00%. These figures suggest that TXN ventures generate a higher ROI than that of ESRX.

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, ESRX’s free cash flow per share is a positive 0.64, while that of TXN is positive 6.3.

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 ESRX is 0.70 and that of TXN is 6.50. This implies that it is easier for ESRX to cover its immediate obligations over the next 12 months than TXN. The debt ratio of ESRX is 0.77 compared to 0.48 for TXN. ESRX can be able to settle its long-term debts and thus is a lower financial risk than TXN.

Valuation

ESRX currently trades at a forward P/E of 8.57, a P/B of 2.37, and a P/S of 0.46 while TXN trades at a forward P/E of 18.49, a P/B of 10.51, and a P/S of 7.13. This means that looking at the earnings, book values and sales basis, ESRX 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 ESRX is currently at a -3.78% to its one-year price target of 85.03. Looking at its rival pricing, TXN is at a -8.31% relative to its price target of 124.70.

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), ESRX is given a 2.60 while 2.40 placed for TXN. This means that analysts are more bullish on the outlook for ESRX 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 ESRX is 3.75 while that of TXN is just 2.98. This means that analysts are more bullish on the forecast for TXN stock.

Conclusion

The stock of Express Scripts Holding Company defeats that of Texas Instruments Incorporated when the two are compared, with ESRX taking 5 out of the total factors that were been considered. ESRX 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, ESRX is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for ESRX is better on when it is viewed on short interest.

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