The shares of Duke Energy Corporation have decreased by more than -8.85% this year alone. The shares recently went up by 0.70% or $0.53 and now trades at $76.67. The shares of The Cheesecake Factory Incorporated (NASDAQ:CAKE), has jumped by 8.32% year to date as of 04/13/2018. The shares currently trade at $52.19 and have been able to report a change of 0.25% over the past one week.
The stock of Duke Energy Corporation and The Cheesecake Factory Incorporated 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: 4.24% versus 10.88%
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 DUK will grow it’s earning at a 4.24% annual rate in the next 5 years. This is in contrast to CAKE which will have a positive growth at a 10.88% annual rate. This means that the higher growth rate of CAKE 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. DUK has an EBITDA margin of 21.85%, this implies that the underlying business of DUK is more profitable. The ROI of DUK is 4.20% while that of CAKE is 26.30%. These figures suggest that CAKE ventures generate a higher ROI than that of DUK.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, DUK’s free cash flow per share is a negative -5.14, while that of CAKE is positive 1.04.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 DUK is 0.70 and that of CAKE is 0.50. This implies that it is easier for DUK to cover its immediate obligations over the next 12 months than CAKE. The debt ratio of DUK is 1.30 compared to 0.02 for CAKE. DUK can be able to settle its long-term debts and thus is a lower financial risk than CAKE.Valuation
DUK currently trades at a forward P/E of 15.50, a P/B of 1.29, and a P/S of 2.26 while CAKE trades at a forward P/E of 17.78, a P/B of 3.89, and a P/S of 1.03. This means that looking at the earnings, book values and sales basis, DUK 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 DUK is currently at a -6.17% to its one-year price target of 81.71. Looking at its rival pricing, CAKE is at a 6.36% relative to its price target of 49.07.
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), DUK is given a 2.90 while 2.80 placed for CAKE. This means that analysts are more bullish on the outlook for DUK 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 DUK is 5.30 while that of CAKE is just 10.58. This means that analysts are more bullish on the forecast for DUK stock.
The stock of Duke Energy Corporation defeats that of The Cheesecake Factory Incorporated when the two are compared, with DUK taking 7 out of the total factors that were been considered. DUK 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, DUK is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for DUK is better on when it is viewed on short interest.