Earnings

Which is more compelling pick right now? – Melco Resorts & Entertainment Limited (MLCO), FireEye, Inc. (FEYE)

The shares of Melco Resorts & Entertainment Limited have decreased by more than -37.33% this year alone. The shares recently went up by 0.11% or $0.02 and now trades at $18.20. The shares of FireEye, Inc. (NASDAQ:FEYE), has jumped by 13.94% year to date as of 10/11/2018. The shares currently trade at $16.18 and have been able to report a change of -6.74% over the past one week.

The stock of Melco Resorts & Entertainment Limited and FireEye, 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 MLCO is 8.20% while that of FEYE is -18.60%. These figures suggest that MLCO ventures generate a higher ROI than that of FEYE.

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, MLCO’s free cash flow per share is a negative -3.09, while that of FEYE is also a negative -0.01.

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 MLCO is 1.00 and that of FEYE is 2.00. This implies that it is easier for MLCO to cover its immediate obligations over the next 12 months than FEYE. The debt ratio of MLCO is 1.28 compared to 1.42 for FEYE. FEYE can be able to settle its long-term debts and thus is a lower financial risk than MLCO.

Valuation

MLCO currently trades at a forward P/E of 13.06, a P/B of 3.01, and a P/S of 1.83 while FEYE trades at a forward P/E of 101.76, a P/B of 4.65, and a P/S of 3.97. This means that looking at the earnings, book values and sales basis, MLCO 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 MLCO is currently at a -44.09% to its one-year price target of 32.55. Looking at its rival pricing, FEYE is at a -16.3% relative to its price target of 19.33.




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), MLCO is given a 1.60 while 2.30 placed for FEYE. This means that analysts are more bullish on the outlook for FEYE 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 MLCO is 0.74 while that of FEYE is just 4.81. This means that analysts are more bullish on the forecast for MLCO stock.

Conclusion

The stock of FireEye, Inc. defeats that of Melco Resorts & Entertainment Limited when the two are compared, with FEYE taking 4 out of the total factors that were been considered. FEYE 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, FEYE is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for FEYE is better on when it is viewed on short interest.

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