Which of these 2 stocks can turn out to be absolute gem? – PPG Industries, Inc. (PPG), Magna International Inc. (MGA)

The shares of PPG Industries, Inc. have decreased by more than -9.44% this year alone. The shares recently went down by -0.88% or -$0.94 and now trades at $105.79. The shares of Magna International Inc. (NYSE:MGA), has slumped by -17.19% year to date as of 12/06/2018. The shares currently trade at $46.93 and have been able to report a change of -4.32% over the past one week.

The stock of PPG Industries, Inc. and Magna International 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: 6.36% versus 4.70%

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 PPG will grow it’s earning at a 6.36% annual rate in the next 5 years. This is in contrast to MGA which will have a positive growth at a 4.70% annual rate. This means that the higher growth rate of PPG 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. PPG has an EBITDA margin of 14.3%, this implies that the underlying business of PPG is more profitable. The ROI of PPG is 14.10% while that of MGA is 15.10%. These figures suggest that MGA ventures generate a higher ROI than that of PPG.

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, PPG’s free cash flow per share is a positive 2.08, while that of MGA is positive 1.89.

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 PPG is 1.70 and that of MGA is 1.20. This implies that it is easier for PPG to cover its immediate obligations over the next 12 months than MGA. The debt ratio of PPG is 1.01 compared to 0.42 for MGA. PPG can be able to settle its long-term debts and thus is a lower financial risk than MGA.


PPG currently trades at a forward P/E of 16.37, a P/B of 5.15, and a P/S of 1.66 while MGA trades at a forward P/E of 6.47, a P/B of 1.45, and a P/S of 0.38. This means that looking at the earnings, book values and sales basis, MGA 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 PPG is currently at a -5.51% to its one-year price target of 111.96. Looking at its rival pricing, MGA is at a -25.66% relative to its price target of 63.13.

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), PPG is given a 2.50 while 2.30 placed for MGA. This means that analysts are more bullish on the outlook for PPG 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 PPG is 3.43 while that of MGA is just 2.60. This means that analysts are more bullish on the forecast for MGA stock.


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

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