Earnings

A Comparison of Top Movers: Philip Morris International Inc. (PM), Patterson-UTI Energy, Inc. (PTEN)

The shares of Philip Morris International Inc. have decreased by more than -3.60% this year alone. The shares recently went up by 1.60% or $1.6 and now trades at $101.85. The shares of Patterson-UTI Energy, Inc. (NASDAQ:PTEN), has slumped by -13.04% year to date as of 04/13/2018. The shares currently trade at $20.01 and have been able to report a change of 13.95% over the past one week.

The stock of Philip Morris International Inc. and Patterson-UTI Energy, 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: 10.85% versus 22.60%

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 PM will grow it’s earning at a 10.85% annual rate in the next 5 years. This is in contrast to PTEN which will have a positive growth at a 22.60% annual rate. This means that the higher growth rate of PTEN 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. PM has an EBITDA margin of 15.85%, this implies that the underlying business of PM is more profitable. The ROI of PM is 39.50% while that of PTEN is -3.70%. These figures suggest that PM ventures generate a higher ROI than that of PTEN.

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, PM’s free cash flow per share is a positive 0.89, while that of PTEN is negative -3.11.

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 PM is 1.40 and that of PTEN is 1.40. This implies that it is easier for PM to cover its immediate obligations over the next 12 months than PTEN.

Valuation

PM currently trades at a forward P/E of 17.48, and a P/S of 5.50 while PTEN trades at a forward P/E of 43.41, a P/B of 1.11, and a P/S of 1.87. This means that looking at the earnings, book values and sales basis, PM 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 PM is currently at a -15.17% to its one-year price target of 120.07. Looking at its rival pricing, PTEN is at a -20.18% relative to its price target of 25.07.

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), PM is given a 2.20 while 2.00 placed for PTEN. This means that analysts are more bullish on the outlook for PM 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 PM is 1.86 while that of PTEN is just 3.02. This means that analysts are more bullish on the forecast for PM stock.

Conclusion

The stock of Patterson-UTI Energy, Inc. defeats that of Philip Morris International Inc. when the two are compared, with PTEN taking 5 out of the total factors that were been considered. PTEN 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, PTEN is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for PTEN is better on when it is viewed on short interest.

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