Earnings

Uncovering the next great stocks: Apple Hospitality REIT, Inc. (APLE), Eastman Chemical Company (EMN)

The shares of Apple Hospitality REIT, Inc. have decreased by more than -19.02% this year alone. The shares recently went up by 1.40% or $0.22 and now trades at $15.88. The shares of Eastman Chemical Company (NYSE:EMN), has slumped by -18.25% year to date as of 12/06/2018. The shares currently trade at $75.73 and have been able to report a change of -4.24% over the past one week.

The stock of Apple Hospitality REIT, Inc. and Eastman Chemical Company 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.

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. APLE has an EBITDA margin of 33.64%, this implies that the underlying business of APLE is more profitable. The ROI of APLE is 4.50% while that of EMN is 10.80%. These figures suggest that EMN ventures generate a higher ROI than that of APLE.

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, APLE’s free cash flow per share is a positive 3.87, while that of EMN is positive 1.83.

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 APLE is 0.37 compared to 1.12 for EMN. EMN can be able to settle its long-term debts and thus is a lower financial risk than APLE.

Valuation

APLE currently trades at a forward P/E of 17.64, a P/B of 1.03, and a P/S of 2.88 while EMN trades at a forward P/E of 8.24, a P/B of 1.80, and a P/S of 1.05. This means that looking at the earnings, book values and sales basis, APLE 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 APLE is currently at a -15.31% to its one-year price target of 18.75. Looking at its rival pricing, EMN is at a -23.37% relative to its price target of 98.82.




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), APLE is given a 2.40 while 2.40 placed for EMN. This means that analysts are equally bullish on their outlook for the two stocks 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 APLE is 4.17 while that of EMN is just 2.38. This means that analysts are more bullish on the forecast for EMN stock.

Conclusion

The stock of Apple Hospitality REIT, Inc. defeats that of Eastman Chemical Company when the two are compared, with APLE taking 5 out of the total factors that were been considered. APLE 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, APLE is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for APLE is better on when it is viewed on short interest.

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