The shares of Fortive Corporation have increased by more than 0.69% this year alone. The shares recently went down by -4.09% or -$3.11 and now trades at $72.85. The shares of Ciena Corporation (NYSE:CIEN), has jumped by 50.26% year to date as of 12/04/2018. The shares currently trade at $31.45 and have been able to report a change of 0.19% over the past one week.
The stock of Fortive Corporation and Ciena Corporation 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: 14.21% versus 15.00%
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 FTV will grow it’s earning at a 14.21% annual rate in the next 5 years. This is in contrast to CIEN which will have a positive growth at a 15.00% annual rate. This means that the higher growth rate of CIEN 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. FTV has an EBITDA margin of 24.19%, this implies that the underlying business of FTV is more profitable. The ROI of FTV is 13.50% while that of CIEN is 41.80%. These figures suggest that CIEN ventures generate a higher ROI than that of FTV.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, FTV’s free cash flow per share is a positive 4.37, while that of CIEN is positive 2.24.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 FTV is 1.00 and that of CIEN is 2.00. This implies that it is easier for FTV to cover its immediate obligations over the next 12 months than CIEN. The debt ratio of FTV is 0.86 compared to 0.53 for CIEN. FTV can be able to settle its long-term debts and thus is a lower financial risk than CIEN.Valuation
FTV currently trades at a forward P/E of 20.30, a P/B of 4.37, and a P/S of 3.27 while CIEN trades at a forward P/E of 17.42, a P/B of 2.53, and a P/S of 1.52. This means that looking at the earnings, book values and sales basis, CIEN 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 FTV is currently at a -13.06% to its one-year price target of 83.79. Looking at its rival pricing, CIEN is at a -8.44% relative to its price target of 34.35.
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), FTV is given a 2.30 while 2.00 placed for CIEN. This means that analysts are more bullish on the outlook for FTV 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 FTV is 1.93 while that of CIEN is just 2.13. This means that analysts are more bullish on the forecast for FTV stock.
The stock of Fortive Corporation defeats that of Ciena Corporation when the two are compared, with FTV taking 6 out of the total factors that were been considered. FTV 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, FTV is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for FTV is better on when it is viewed on short interest.