The shares of Canadian Natural Resources Limited have decreased by more than -1.65% this year alone. The shares recently went up by 1.77% or $0.61 and now trades at $35.13. The shares of Concho Resources Inc. (NYSE:CXO), has jumped by 0.53% year to date as of 04/13/2018. The shares currently trade at $151.02 and have been able to report a change of 13.01% over the past one week.
The stock of Canadian Natural Resources Limited and Concho Resources 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: 9.86% versus 70.68%
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 CNQ will grow it’s earning at a 9.86% annual rate in the next 5 years. This is in contrast to CXO which will have a positive growth at a 70.68% annual rate. This means that the higher growth rate of CXO 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 CNQ is 3.40% while that of CXO is 5.80%. These figures suggest that CXO ventures generate a higher ROI than that of CNQ.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, CNQ’s free cash flow per share is a positive 0.29, while that of CXO is negative -0.52.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 CNQ is 0.80 and that of CXO is 0.50. This implies that it is easier for CNQ to cover its immediate obligations over the next 12 months than CXO. The debt ratio of CNQ is 0.71 compared to 0.31 for CXO. CNQ can be able to settle its long-term debts and thus is a lower financial risk than CXO.Valuation
CNQ currently trades at a forward P/E of 16.89, a P/B of 1.70, and a P/S of 3.20 while CXO trades at a forward P/E of 26.54, a P/B of 2.50, and a P/S of 8.62. This means that looking at the earnings, book values and sales basis, CNQ 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 CNQ is currently at a -13.77% to its one-year price target of 40.74. Looking at its rival pricing, CXO is at a -16.33% relative to its price target of 180.50.
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), CNQ is given a 1.90 while 1.90 placed for CXO. 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 CNQ is 1.30 while that of CXO is just 2.85. This means that analysts are more bullish on the forecast for CNQ stock.
The stock of Concho Resources Inc. defeats that of Canadian Natural Resources Limited when the two are compared, with CXO taking 6 out of the total factors that were been considered. CXO 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, CXO is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for CXO is better on when it is viewed on short interest.