Earnings

Ensco plc (ESV) is better stock pick than Denbury Resources Inc. (DNR)

The shares of Ensco plc have increased by more than 44.84% this year alone. The shares recently went down by -0.70% or -$0.06 and now trades at $8.56. The shares of Denbury Resources Inc. (NYSE:DNR), has jumped by 154.75% year to date as of 10/11/2018. The shares currently trade at $5.63 and have been able to report a change of -13.12% over the past one week.

The stock of Ensco plc and Denbury Resources 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. ESV has an EBITDA margin of 16.6%, this implies that the underlying business of DNR is more profitable. The ROI of ESV is -1.70% while that of DNR is 5.60%. These figures suggest that DNR ventures generate a higher ROI than that of ESV.

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, ESV’s free cash flow per share is a negative -6.64, while that of DNR is positive 2.86.

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 ESV is 2.70 and that of DNR is 0.40. This implies that it is easier for ESV to cover its immediate obligations over the next 12 months than DNR. The debt ratio of ESV is 0.00 compared to 3.16 for DNR. DNR can be able to settle its long-term debts and thus is a lower financial risk than ESV.

Valuation

ESV currently trades at a P/B of 0.44, and a P/S of 2.08 while DNR trades at a forward P/E of 7.37, a P/B of 2.76, and a P/S of 1.95. This means that looking at the earnings, book values and sales basis, ESV 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 ESV is currently at a 12.93% to its one-year price target of 7.58. Looking at its rival pricing, DNR is at a 3.3% relative to its price target of 5.45.




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), ESV is given a 2.60 while 2.70 placed for DNR. This means that analysts are more bullish on the outlook for DNR 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 ESV is 6.50 while that of DNR is just 5.18. This means that analysts are more bullish on the forecast for DNR stock.

Conclusion

The stock of Ensco plc defeats that of Denbury Resources Inc. when the two are compared, with ESV taking 6 out of the total factors that were been considered. ESV 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, ESV is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for ESV is better on when it is viewed on short interest.

Previous ArticleNext Article

Related Post

Comparing Top Moving Stocks Viacom, Inc. (VIAB), T... The shares of Viacom, Inc. have decreased by more than -4.97% this year alone. The shares recently went down by -1.91% or -$0.57 and now trades at $29...
Set Sail With The Charles Schwab Corporation (SCHW... The shares of The Charles Schwab Corporation have increased by more than 2.41% this year alone. The shares recently went up by 0.88% or $0.46 and now ...
Comparing Top Moving Stocks MaxLinear, Inc. (MXL),... The shares of MaxLinear, Inc. have decreased by more than -34.90% this year alone. The shares recently went up by 1.12% or $0.19 and now trades at $17...
Set Sail With CVS Health Corporation (CVS), Philli... The shares of CVS Health Corporation have increased by more than 7.05% this year alone. The shares recently went down by -1.44% or -$1.13 and now trad...
Are These Stocks A Sure Bet? – Marathon Oil ... The shares of Marathon Oil Corporation have increased by more than 23.27% this year alone. The shares recently went up by 3.27% or $0.66 and now trade...