The shares of Aetna Inc. have increased by more than 44.26% this year alone. The shares recently went up by 0.12% or $0.21 and now trades at $178.90. The shares of Whiting Petroleum Corporation (NYSE:WLL), has slumped by -51.10% year to date as of 12/05/2017. The shares currently trade at $23.51 and have been able to report a change of 1.12% over the past one week.
The stock of Aetna Inc. and Whiting Petroleum Corporation were two of the most active stocks on Tueday. 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: 10.68% versus 25.60%
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 AET will grow it’s earning at a 10.68% annual rate in the next 5 years. This is in contrast to WLL which will have a positive growth at a 25.60% annual rate. This means that the higher growth rate of WLL 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. AET has an EBITDA margin of 6.43%, this implies that the underlying business of WLL is more profitable. The ROI of AET is 7.40% while that of WLL is -9.00%. These figures suggest that AET ventures generate a higher ROI than that of WLL.
The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, AET’s free cash flow per share is a positive 1.94, while that of WLL is negative -17.89.
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 debt ratio of AET is 0.65 compared to 0.62 for WLL. AET can be able to settle its long-term debts and thus is a lower financial risk than WLL.
AET currently trades at a forward P/E of 17.77, a P/B of 3.79, and a P/S of 0.95 while WLL trades at a P/B of 0.45, and a P/S of 1.58. This means that looking at the earnings, book values and sales basis, AET 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 AET is currently at a -3.02% to its one-year price target of 184.47. Looking at its rival pricing, WLL is at a -25.62% relative to its price target of 31.61. This figure implies that over the next one year, WLL is a better investment.
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), AET is given a 2.20 while 2.70 placed for WLL. This means that analysts are more bullish on the outlook for WLL 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 AET is 0.93 while that of WLL is just 3.04. This means that analysts are more bullish on the forecast for AET stock.
The stock of Aetna Inc. defeats that of Whiting Petroleum Corporation when the two are compared, with AET taking 7 out of the total factors that were been considered. AET 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, AET is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for AET is better on when it is viewed on short interest.