The shares of The Interpublic Group of Companies, Inc. have increased by more than 7.14% this year alone. The shares recently went down by -1.55% or -$0.34 and now trades at $21.60. The shares of Roku, Inc. (NASDAQ:ROKU), has jumped by 8.30% year to date as of 10/11/2018. The shares currently trade at $56.08 and have been able to report a change of -16.07% over the past one week.
The stock of The Interpublic Group of Companies, Inc. and Roku, 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.Next 5Y EPS Growth: 7.23% versus 21.00%
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 IPG will grow it’s earning at a 7.23% annual rate in the next 5 years. This is in contrast to ROKU which will have a positive growth at a 21.00% annual rate. This means that the higher growth rate of ROKU 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. IPG has an EBITDA margin of 13.47%, this implies that the underlying business of IPG is more profitable. The ROI of IPG is 17.60% while that of ROKU is -14.60%. These figures suggest that IPG ventures generate a higher ROI than that of ROKU.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, IPG’s free cash flow per share is a positive 0.68.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 IPG is 0.90 and that of ROKU is 2.40. This implies that it is easier for IPG to cover its immediate obligations over the next 12 months than ROKU. The debt ratio of IPG is 0.99 compared to 0.00 for ROKU. IPG can be able to settle its long-term debts and thus is a lower financial risk than ROKU.Valuation
IPG currently trades at a forward P/E of 11.95, a P/B of 4.02, and a P/S of 0.94 while ROKU trades at a P/B of 27.22, and a P/S of 9.79. This means that looking at the earnings, book values and sales basis, IPG 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 IPG is currently at a -8.98% to its one-year price target of 23.73. Looking at its rival pricing, ROKU is at a -15.96% relative to its price target of 66.73.
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), IPG is given a 2.80 while 2.20 placed for ROKU. This means that analysts are more bullish on the outlook for IPG 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 IPG is 6.41 while that of ROKU is just 1.10. This means that analysts are more bullish on the forecast for ROKU stock.
The stock of The Interpublic Group of Companies, Inc. defeats that of Roku, Inc. when the two are compared, with IPG taking 6 out of the total factors that were been considered. IPG 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, IPG is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for IPG is better on when it is viewed on short interest.