Earnings

Which of 2 stocks would appeal to long-term investors? Manulife Financial Corporation (MFC), W&T Offshore, Inc. (WTI)

The shares of Manulife Financial Corporation have decreased by more than -11.79% this year alone. The shares recently went up by 1.88% or $0.34 and now trades at $18.40. The shares of W&T Offshore, Inc. (NYSE:WTI), has jumped by 94.86% year to date as of 08/09/2018. The shares currently trade at $6.45 and have been able to report a change of -9.41% over the past one week.

The stock of Manulife Financial Corporation and W&T Offshore, Inc. 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.

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. The ROI of MFC is 7.60% while that of WTI is 56.40%. These figures suggest that WTI ventures generate a higher ROI than that of MFC.

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, MFC’s free cash flow per share is a positive 7.5, while that of WTI is positive 0.01.

Valuation



MFC currently trades at a forward P/E of 6.47, a P/B of 1.21, and a P/S of 0.91 while WTI trades at a forward P/E of 8.51, and a P/S of 1.61. This means that looking at the earnings, book values and sales basis, MFC 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 MFC is currently at a -22.07% to its one-year price target of 23.61. Looking at its rival pricing, WTI is at a -0.77% relative to its price target of 6.50.

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), MFC is given a 1.50 while 3.50 placed for WTI. This means that analysts are more bullish on the outlook for WTI 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 MFC is 3.83 while that of WTI is just 2.74. This means that analysts are more bullish on the forecast for WTI stock.

Conclusion

The stock of W&T Offshore, Inc. defeats that of Manulife Financial Corporation when the two are compared, with WTI taking 6 out of the total factors that were been considered. WTI 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, WTI is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for WTI is better on when it is viewed on short interest.

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