Earnings

Set Sail With ADT Inc. (ADT), BlackBerry Limited (BB)

The shares of ADT Inc. have decreased by more than -31.23% this year alone. The shares recently went down by -1.39% or -$0.12 and now trades at $8.52. The shares of BlackBerry Limited (NYSE:BB), has slumped by -7.79% year to date as of 09/11/2018. The shares currently trade at $10.30 and have been able to report a change of -3.20% over the past one week.

The stock of ADT Inc. and BlackBerry Limited 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.

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. ADT has an EBITDA margin of 22.71%, this implies that the underlying business of BB is more profitable. The ROI of ADT is 7.10% while that of BB is 10.60%. These figures suggest that BB ventures generate a higher ROI than that of ADT.

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, ADT’s free cash flow per share is a positive 5.96.

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 ADT is 0.90 and that of BB is 6.50. This implies that it is easier for ADT to cover its immediate obligations over the next 12 months than BB. The debt ratio of ADT is 2.05 compared to 0.00 for BB. ADT can be able to settle its long-term debts and thus is a lower financial risk than BB.

Valuation

ADT currently trades at a forward P/E of 7.38, a P/B of 1.37, and a P/S of 1.48 while BB trades at a forward P/E of 68.21, a P/B of 2.33, and a P/S of 6.08. This means that looking at the earnings, book values and sales basis, ADT 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 ADT is currently at a -37.86% to its one-year price target of 13.71. Looking at its rival pricing, BB is at a -11.28% relative to its price target of 11.61.




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), ADT is given a 1.70 while 2.70 placed for BB. This means that analysts are more bullish on the outlook for BB 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 ADT is 13.62 while that of BB is just 9.07. This means that analysts are more bullish on the forecast for BB stock.

Conclusion

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

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