Earnings

Which Market Offer More Value? – PBF Energy Inc. (PBF), Tenet Healthcare Corporation (THC)

The shares of PBF Energy Inc. have increased by more than 40.85% this year alone. The shares recently went down by -1.77% or -$0.9 and now trades at $49.93. The shares of Tenet Healthcare Corporation (NYSE:THC), has jumped by 67.74% year to date as of 10/11/2018. The shares currently trade at $25.43 and have been able to report a change of -8.13% over the past one week.

The stock of PBF Energy Inc. and Tenet Healthcare 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.

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. PBF has an EBITDA margin of 6.02%, this implies that the underlying business of THC is more profitable. The ROI of PBF is 8.10% while that of THC is 6.60%. These figures suggest that PBF ventures generate a higher ROI than that of THC.

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, PBF’s free cash flow per share is a positive 1.25, while that of THC is positive 1.14.

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 PBF is 1.70 and that of THC is 1.10. This implies that it is easier for PBF to cover its immediate obligations over the next 12 months than THC.

Valuation

PBF currently trades at a forward P/E of 9.61, a P/B of 2.17, and a P/S of 0.24 while THC trades at a forward P/E of 12.47, and a P/S of 0.14. This means that looking at the earnings, book values and sales basis, PBF 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 PBF is currently at a -8.87% to its one-year price target of 54.79. Looking at its rival pricing, THC is at a -27.34% relative to its price target of 35.00.




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), PBF is given a 2.60 while 2.70 placed for THC. This means that analysts are more bullish on the outlook for THC 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 PBF is 2.76 while that of THC is just 9.53. This means that analysts are more bullish on the forecast for PBF stock.

Conclusion

The stock of PBF Energy Inc. defeats that of Tenet Healthcare Corporation when the two are compared, with PBF taking 7 out of the total factors that were been considered. PBF 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, PBF is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for PBF is better on when it is viewed on short interest.

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