Earnings

Which is more compelling pick right now? – Coty Inc. (COTY), Starwood Property Trust, Inc. (STWD)

The shares of Coty Inc. have decreased by more than -58.27% this year alone. The shares recently went down by -4.16% or -$0.36 and now trades at $8.30. The shares of Starwood Property Trust, Inc. (NYSE:STWD), has jumped by 1.78% year to date as of 11/08/2018. The shares currently trade at $21.73 and have been able to report a change of 0.84% over the past one week.

The stock of Coty Inc. and Starwood Property Trust, 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: 15.50% versus 2.23%

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 COTY will grow it’s earning at a 15.50% annual rate in the next 5 years. This is in contrast to STWD which will have a positive growth at a 2.23% annual rate. This means that the higher growth rate of COTY 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. COTY has an EBITDA margin of 9.04%, this implies that the underlying business of STWD is more profitable. The ROI of COTY is 1.30% while that of STWD is 0.90%. These figures suggest that COTY ventures generate a higher ROI than that of STWD.

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, COTY’s free cash flow per share is a positive 0.

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 COTY is 0.85 compared to 1.92 for STWD. STWD can be able to settle its long-term debts and thus is a lower financial risk than COTY.

Valuation

COTY currently trades at a forward P/E of 9.36, a P/B of 0.70, and a P/S of 0.66 while STWD trades at a forward P/E of 9.73, a P/B of 1.28, and a P/S of 5.80. This means that looking at the earnings, book values and sales basis, COTY 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 COTY is currently at a -40.71% to its one-year price target of 14.00. Looking at its rival pricing, STWD is at a -8.81% relative to its price target of 23.83.

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), COTY is given a 2.70 while 2.00 placed for STWD. This means that analysts are more bullish on the outlook for COTY 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 COTY is 8.20 while that of STWD is just 3.96. This means that analysts are more bullish on the forecast for STWD stock.

Conclusion

The stock of Starwood Property Trust, Inc. defeats that of Coty Inc. when the two are compared, with STWD taking 4 out of the total factors that were been considered. STWD 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, STWD is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for STWD is better on when it is viewed on short interest.

Previous ArticleNext Article

Related Post

Which of 2 stocks would appeal to long-term invest... The shares of MannKind Corporation have decreased by more than -16.81% this year alone. The shares recently went up by 0.52% or $0.01 and now trades a...
Are These Stocks A Sure Bet? – Flex Ltd. (FL... The shares of Flex Ltd. have decreased by more than -52.25% this year alone. The shares recently went up by 9.29% or $0.73 and now trades at $8.59. Th...
Which is more compelling pick right now? – V... The shares of Valeritas Holdings, Inc. have decreased by more than -75.98% this year alone. The shares recently went down by -20.44% or -$0.18 and now...
Comparing Top Moving Stocks Groupon, Inc. (GRPN), ... The shares of Groupon, Inc. have decreased by more than -31.18% this year alone. The shares recently went up by 0.86% or $0.03 and now trades at $3.51...
L Brands, Inc. (LB) is better stock pick than ARRI... The shares of ARRIS International plc have increased by more than 19.70% this year alone. The shares recently went up by 0.16% or $0.05 and now trades...