Earnings

Reliable Long-term Trend to Profit From: Chubb Limited (CB), GrafTech International Ltd. (EAF)

The shares of Chubb Limited have decreased by more than -9.44% this year alone. The shares recently went down by -0.88% or -$1.18 and now trades at $132.33. The shares of GrafTech International Ltd. (NYSE:EAF), has jumped by 1.94% year to date as of 12/04/2018. The shares currently trade at $14.73 and have been able to report a change of -2.06% over the past one week.

The stock of Chubb Limited and GrafTech International Ltd. 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.

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. CB has an EBITDA margin of 20.03%, this implies that the underlying business of CB is more profitable. The ROI of CB is 5.50% while that of EAF is 14.50%. These figures suggest that EAF ventures generate a higher ROI than that of CB.

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, CB’s free cash flow per share is a positive 5.19, while that of EAF is positive 0.03.

Valuation



CB currently trades at a forward P/E of 11.90, a P/B of 1.20, and a P/S of 1.85 while EAF trades at a forward P/E of 4.27, and a P/S of 2.80. This means that looking at the earnings, book values and sales basis, CB 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 CB is currently at a -13.55% to its one-year price target of 153.07.

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 CB is 2.90 while that of EAF is just 8.03. This means that analysts are more bullish on the forecast for CB stock.




Conclusion

The stock of Chubb Limited defeats that of GrafTech International Ltd. when the two are compared, with CB taking 6 out of the total factors that were been considered. CB 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, CB is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for CB is better on when it is viewed on short interest.

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