The shares of Altria Group, Inc. have decreased by more than -10.45% this year alone. The shares recently went up by 0.87% or $0.55 and now trades at $63.95. The shares of HollyFrontier Corporation (NYSE:HFC), has jumped by 8.77% year to date as of 04/13/2018. The shares currently trade at $55.71 and have been able to report a change of 6.60% over the past one week.
The stock of Altria Group, Inc. and HollyFrontier Corporation 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: 10.15% versus 30.96%
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 MO will grow it’s earning at a 10.15% annual rate in the next 5 years. This is in contrast to HFC which will have a positive growth at a 30.96% annual rate. This means that the higher growth rate of HFC 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. MO has an EBITDA margin of 41.8%, this implies that the underlying business of MO is more profitable. The ROI of MO is 24.00% while that of HFC is 8.00%. These figures suggest that MO ventures generate a higher ROI than that of HFC.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, MO’s free cash flow per share is a negative -2.15, while that of HFC is positive 0.2.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 MO is 0.60 and that of HFC is 2.20. This implies that it is easier for MO to cover its immediate obligations over the next 12 months than HFC. The debt ratio of MO is 0.90 compared to 0.47 for HFC. MO can be able to settle its long-term debts and thus is a lower financial risk than HFC.Valuation
MO currently trades at a forward P/E of 14.66, a P/B of 7.91, and a P/S of 4.76 while HFC trades at a forward P/E of 13.24, a P/B of 1.83, and a P/S of 0.69. This means that looking at the earnings, book values and sales basis, HFC 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 MO is currently at a -17.02% to its one-year price target of 77.07. Looking at its rival pricing, HFC is at a 12.93% relative to its price target of 49.33.
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), MO is given a 1.90 while 2.90 placed for HFC. This means that analysts are more bullish on the outlook for HFC 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 MO is 2.01 while that of HFC is just 4.20. This means that analysts are more bullish on the forecast for MO stock.
The stock of Altria Group, Inc. defeats that of HollyFrontier Corporation when the two are compared, with MO taking 6 out of the total factors that were been considered. MO 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, MO is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for MO is better on when it is viewed on short interest.