Earnings

Are These Stocks A Sure Bet? – Pitney Bowes Inc. (PBI), CBRE Group, Inc. (CBRE)

The shares of Pitney Bowes Inc. have decreased by more than -31.66% this year alone. The shares recently went down by -9.91% or -$0.84 and now trades at $7.64. The shares of CBRE Group, Inc. (NYSE:CBRE), has slumped by -3.63% year to date as of 12/04/2018. The shares currently trade at $41.74 and have been able to report a change of -2.36% over the past one week.

The stock of Pitney Bowes Inc. and CBRE Group, Inc. were two of the most active stocks on Tuesday. 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: 4.00% versus 11.90%

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 PBI will grow it’s earning at a 4.00% annual rate in the next 5 years. This is in contrast to CBRE which will have a positive growth at a 11.90% annual rate. This means that the higher growth rate of CBRE 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. PBI has an EBITDA margin of 14.74%, this implies that the underlying business of PBI is more profitable. The ROI of PBI is 8.40% while that of CBRE is 10.70%. These figures suggest that CBRE ventures generate a higher ROI than that of PBI.

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, PBI’s free cash flow per share is a positive 1.11, while that of CBRE is positive 3.93.

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 PBI is 1.20 and that of CBRE is 1.20. This implies that it is easier for PBI to cover its immediate obligations over the next 12 months than CBRE. The debt ratio of PBI is 13.01 compared to 0.74 for CBRE. PBI can be able to settle its long-term debts and thus is a lower financial risk than CBRE.

Valuation

PBI currently trades at a forward P/E of 6.17, a P/B of 5.70, and a P/S of 0.40 while CBRE trades at a forward P/E of 12.23, a P/B of 3.01, and a P/S of 0.73. This means that looking at the earnings, book values and sales basis, PBI 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 PBI is currently at a -32.57% to its one-year price target of 11.33. Looking at its rival pricing, CBRE is at a -21.62% relative to its price target of 53.25.

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), PBI is given a 2.20 while 2.00 placed for CBRE. This means that analysts are more bullish on the outlook for PBI 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 PBI is 5.70 while that of CBRE is just 3.39. This means that analysts are more bullish on the forecast for CBRE stock.

Conclusion

The stock of Pitney Bowes Inc. defeats that of CBRE Group, Inc. when the two are compared, with PBI taking 6 out of the total factors that were been considered. PBI 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, PBI is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for PBI is better on when it is viewed on short interest.

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