The shares of Huntsman Corporation have increased by more than 58.02% this year alone. The shares recently went down by -2.01% or -$0.62 and now trades at $30.15. The shares of Energy Transfer Partners, L.P. (NYSE:ETP), has slumped by -31.97% year to date as of 12/05/2017. The shares currently trade at $16.34 and have been able to report a change of 4.01% over the past one week.
The stock of Huntsman Corporation and Energy Transfer Partners, L.P. 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: 8.00% versus -0.60%
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 HUN will grow it’s earning at a 8.00% annual rate in the next 5 years. This is in contrast to ETP which will have a positive growth at a -0.60% annual rate. This means that the higher growth rate of HUN 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. HUN has an EBITDA margin of 9.2%, this implies that the underlying business of ETP is more profitable. The ROI of HUN is 10.20% while that of ETP is 1.50%. These figures suggest that HUN ventures generate a higher ROI than that of ETP.
The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, HUN’s free cash flow per share is a positive 3.13, while that of ETP is negative -26.64.
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 HUN is 1.90 and that of ETP is 0.80. This implies that it is easier for HUN to cover its immediate obligations over the next 12 months than ETP. The debt ratio of HUN is 1.36 compared to 1.30 for ETP. HUN can be able to settle its long-term debts and thus is a lower financial risk than ETP.
HUN currently trades at a forward P/E of 12.98, a P/B of 3.41, and a P/S of 0.84 while ETP trades at a forward P/E of 17.16, a P/B of 0.70, and a P/S of 0.76. This means that looking at the earnings, book values and sales basis, HUN 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 HUN is currently at a -20.03% to its one-year price target of 37.70. Looking at its rival pricing, ETP is at a -34.9% relative to its price target of 25.10. This figure implies that over the next one year, ETP 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), HUN is given a 1.70 while 1.90 placed for ETP. This means that analysts are more bullish on the outlook for ETP 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 HUN is 2.36 while that of ETP is just 2.51. This means that analysts are more bullish on the forecast for HUN stock.
The stock of Energy Transfer Partners, L.P. defeats that of Huntsman Corporation when the two are compared, with ETP taking 6 out of the total factors that were been considered. ETP 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, ETP is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for ETP is better on when it is viewed on short interest.