Earnings

A Comparison of Top Movers: Aramark (ARMK), Ciena Corporation (CIEN)

The shares of Aramark have decreased by more than -7.93% this year alone. The shares recently went down by -2.43% or -$0.98 and now trades at $39.35. The shares of Ciena Corporation (NYSE:CIEN), has jumped by 34.93% year to date as of 10/11/2018. The shares currently trade at $28.24 and have been able to report a change of -5.65% over the past one week.

The stock of Aramark and Ciena Corporation 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: 14.95% versus 15.00%

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 ARMK will grow it’s earning at a 14.95% annual rate in the next 5 years. This is in contrast to CIEN which will have a positive growth at a 15.00% annual rate. This means that the higher growth rate of CIEN 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. ARMK has an EBITDA margin of 6.51%, this implies that the underlying business of CIEN is more profitable. The ROI of ARMK is 8.60% while that of CIEN is 41.80%. These figures suggest that CIEN ventures generate a higher ROI than that of ARMK.

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, ARMK’s free cash flow per share is a negative -0.62, while that of CIEN is positive 2.24.

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 ARMK is 1.40 and that of CIEN is 2.00. This implies that it is easier for ARMK to cover its immediate obligations over the next 12 months than CIEN. The debt ratio of ARMK is 2.77 compared to 0.53 for CIEN. ARMK can be able to settle its long-term debts and thus is a lower financial risk than CIEN.

Valuation

ARMK currently trades at a forward P/E of 15.31, a P/B of 3.40, and a P/S of 0.63 while CIEN trades at a forward P/E of 15.60, a P/B of 2.28, and a P/S of 1.39. This means that looking at the earnings, book values and sales basis, ARMK 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 ARMK is currently at a -19.69% to its one-year price target of 49.00. Looking at its rival pricing, CIEN is at a -17.45% relative to its price target of 34.21.

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), ARMK is given a 2.30 while 2.00 placed for CIEN. This means that analysts are more bullish on the outlook for ARMK 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 ARMK is 7.24 while that of CIEN is just 6.30. This means that analysts are more bullish on the forecast for CIEN stock.

Conclusion

The stock of Aramark defeats that of Ciena Corporation when the two are compared, with ARMK taking 4 out of the total factors that were been considered. ARMK 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, ARMK is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for ARMK is better on when it is viewed on short interest.

Previous ArticleNext Article

Related Post

Which is more compelling pick right now? – I... The shares of Infinera Corporation have increased by more than 14.69% this year alone. The shares recently went down by -2.29% or -$0.17 and now trade...
A Comparison of Top Movers: Extraction Oil & ... The shares of Extraction Oil & Gas, Inc. have increased by more than 3.07% this year alone. The shares recently went up by 1.65% or $0.24 and now...
Which of these 2 stocks can turn out to be absolut... The shares of Winnebago Industries, Inc. have decreased by more than -40.29% this year alone. The shares recently went up by 4.57% or $1.45 and now tr...
Comparing Top Moving Stocks eGain Corporation (EGA... The shares of eGain Corporation have increased by more than 196.19% this year alone. The shares recently went down by -13.37% or -$2.4 and now trades ...
Taking Tally Of Hecla Mining Company (HL), Infiner... The shares of Hecla Mining Company have decreased by more than -26.20% this year alone. The shares recently went up by 0.34% or $0.01 and now trades a...