Earnings

A Comparison of Top Movers: FireEye, Inc. (FEYE), Brookdale Senior Living Inc. (BKD)

The shares of FireEye, Inc. have increased by more than 31.76% this year alone. The shares recently went down by -0.21% or -$0.04 and now trades at $18.71. The shares of Brookdale Senior Living Inc. (NYSE:BKD), has slumped by -31.65% year to date as of 04/13/2018. The shares currently trade at $6.63 and have been able to report a change of -1.78% over the past one week.

The stock of FireEye, Inc. and Brookdale Senior Living Inc. were two of the most active stocks on Friday. 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: 15.00% versus 10.00%

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 FEYE will grow it’s earning at a 15.00% annual rate in the next 5 years. This is in contrast to BKD which will have a positive growth at a 10.00% annual rate. This means that the higher growth rate of FEYE 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. The ROI of FEYE is -17.30% while that of BKD is -5.70%. These figures suggest that BKD ventures generate a higher ROI than that of FEYE.

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, FEYE’s free cash flow per share is a positive 0, while that of BKD is positive 0.59.

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 FEYE is 1.90 and that of BKD is 0.80. This implies that it is easier for FEYE to cover its immediate obligations over the next 12 months than BKD. The debt ratio of FEYE is 1.05 compared to 3.36 for BKD. BKD can be able to settle its long-term debts and thus is a lower financial risk than FEYE.

Valuation

FEYE currently trades at a forward P/E of 119.94, a P/B of 4.59, and a P/S of 4.78 while BKD trades at a P/B of 0.81, and a P/S of 0.26. This means that looking at the earnings, book values and sales basis, FEYE 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 FEYE is currently at a 3.71% to its one-year price target of 18.04. Looking at its rival pricing, BKD is at a -35.82% relative to its price target of 10.33.

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), FEYE is given a 2.30 while 2.30 placed for BKD. 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 FEYE is 6.01 while that of BKD is just 6.69. This means that analysts are more bullish on the forecast for FEYE stock.

Conclusion

The stock of FireEye, Inc. defeats that of Brookdale Senior Living Inc. when the two are compared, with FEYE taking 5 out of the total factors that were been considered. FEYE 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, FEYE is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for FEYE is better on when it is viewed on short interest.

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