Earnings

Taking Tally Of Cleveland-Cliffs Inc. (CLF), Knight-Swift Transportation Holdings Inc. (KNX)

The shares of Cleveland-Cliffs Inc. have increased by more than 44.80% this year alone. The shares recently went down by -3.42% or -$0.37 and now trades at $10.44. The shares of Knight-Swift Transportation Holdings Inc. (NYSE:KNX), has slumped by -21.50% year to date as of 11/08/2018. The shares currently trade at $34.32 and have been able to report a change of 1.99% over the past one week.

The stock of Cleveland-Cliffs Inc. and Knight-Swift Transportation Holdings 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: -2.74% versus 27.37%

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 CLF will grow it’s earning at a -2.74% annual rate in the next 5 years. This is in contrast to KNX which will have a positive growth at a 27.37% annual rate. This means that the higher growth rate of KNX 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. CLF has an EBITDA margin of 25.21%, this implies that the underlying business of CLF is more profitable. The ROI of CLF is 5.50% while that of KNX is 2.10%. These figures suggest that CLF ventures generate a higher ROI than that of KNX.

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, CLF’s free cash flow per share is a positive 4.6.

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 CLF is 4.30 and that of KNX is 1.50. This implies that it is easier for CLF to cover its immediate obligations over the next 12 months than KNX.

Valuation

CLF currently trades at a forward P/E of 6.15, and a P/S of 1.38 while KNX trades at a forward P/E of 12.70, a P/B of 1.14, and a P/S of 1.15. This means that looking at the earnings, book values and sales basis, CLF 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 CLF is currently at a -22.03% to its one-year price target of 13.39. Looking at its rival pricing, KNX is at a -22.09% relative to its price target of 44.05.

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), CLF is given a 2.20 while 1.90 placed for KNX. This means that analysts are more bullish on the outlook for CLF 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 CLF is 4.54 while that of KNX is just 10.73. This means that analysts are more bullish on the forecast for CLF stock.

Conclusion

The stock of Knight-Swift Transportation Holdings Inc. defeats that of Cleveland-Cliffs Inc. when the two are compared, with KNX taking 5 out of the total factors that were been considered. KNX 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, KNX is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for KNX is better on when it is viewed on short interest.

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