Earnings

Which Market Offer More Value? – Guidewire Software, Inc. (GWRE), Healthcare Trust of America, Inc. (HTA)

The shares of Guidewire Software, Inc. have increased by more than 17.20% this year alone. The shares recently went down by -2.75% or -$2.46 and now trades at $87.03. The shares of Healthcare Trust of America, Inc. (NYSE:HTA), has slumped by -16.08% year to date as of 10/11/2018. The shares currently trade at $25.21 and have been able to report a change of -1.68% over the past one week.

The stock of Guidewire Software, Inc. and Healthcare Trust of America, 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. GWRE has an EBITDA margin of 8.08%, this implies that the underlying business of HTA is more profitable. The ROI of GWRE is 0.10% while that of HTA is 1.90%. These figures suggest that HTA ventures generate a higher ROI than that of GWRE.

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, GWRE’s free cash flow per share is a positive 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 debt ratio of GWRE is 0.21 compared to 0.83 for HTA. HTA can be able to settle its long-term debts and thus is a lower financial risk than GWRE.

Valuation

GWRE currently trades at a forward P/E of 60.56, a P/B of 4.65, and a P/S of 10.67 while HTA trades at a forward P/E of 62.71, a P/B of 1.59, and a P/S of 7.47. This means that looking at the earnings, book values and sales basis, GWRE 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 GWRE is currently at a -21.44% to its one-year price target of 110.78. Looking at its rival pricing, HTA is at a -16.25% relative to its price target of 30.10.




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), GWRE is given a 2.10 while 2.30 placed for HTA. This means that analysts are more bullish on the outlook for HTA 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 GWRE is 4.62 while that of HTA is just 2.28. This means that analysts are more bullish on the forecast for HTA stock.

Conclusion

The stock of Healthcare Trust of America, Inc. defeats that of Guidewire Software, Inc. when the two are compared, with HTA taking 6 out of the total factors that were been considered. HTA 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, HTA is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for HTA is better on when it is viewed on short interest.

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