The shares of Esterline Technologies Corporation have increased by more than 54.44% this year alone. The shares recently went down by -0.03% or -$0.04 and now trades at $115.37. The shares of Randgold Resources Limited (NASDAQ:GOLD), has slumped by -20.96% year to date as of 10/11/2018. The shares currently trade at $78.16 and have been able to report a change of 8.45% over the past one week.
The stock of Esterline Technologies Corporation and Randgold Resources Limited 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: 8.56% versus 2.20%
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 ESL will grow it’s earning at a 8.56% annual rate in the next 5 years. This is in contrast to GOLD which will have a positive growth at a 2.20% annual rate. This means that the higher growth rate of ESL 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. ESL has an EBITDA margin of 12.27%, this implies that the underlying business of ESL is more profitable. The ROI of ESL is 5.80% while that of GOLD is 8.60%. These figures suggest that GOLD ventures generate a higher ROI than that of ESL.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, ESL’s free cash flow per share is a positive 0.9, while that of GOLD is negative -7.3.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 ESL is 3.40 and that of GOLD is 6.80. This implies that it is easier for ESL to cover its immediate obligations over the next 12 months than GOLD. The debt ratio of ESL is 0.42 compared to 0.00 for GOLD. ESL can be able to settle its long-term debts and thus is a lower financial risk than GOLD.Valuation
ESL currently trades at a forward P/E of 25.72, a P/B of 1.92, and a P/S of 1.68 while GOLD trades at a forward P/E of 22.63, a P/B of 2.03, and a P/S of 6.26. This means that looking at the earnings, book values and sales basis, ESL 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 ESL is currently at a 44.01% to its one-year price target of 80.11. Looking at its rival pricing, GOLD is at a -21.69% relative to its price target of 99.81.
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), ESL is given a 3.40 while 2.00 placed for GOLD. This means that analysts are more bullish on the outlook for ESL 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 ESL is 2.15 while that of GOLD is just 1.69. This means that analysts are more bullish on the forecast for GOLD stock.
The stock of Esterline Technologies Corporation defeats that of Randgold Resources Limited when the two are compared, with ESL taking 6 out of the total factors that were been considered. ESL 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, ESL is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for ESL is better on when it is viewed on short interest.