Earnings

Comparing Valuation And Performance: Banco Bradesco S.A. (BBD), Exxon Mobil Corporation (XOM)

The shares of Banco Bradesco S.A. have increased by more than 6.24% this year alone. The shares recently went down by -3.05% or -$0.31 and now trades at $9.87. The shares of Exxon Mobil Corporation (NYSE:XOM), has slumped by -6.93% year to date as of 04/13/2018. The shares currently trade at $77.84 and have been able to report a change of 3.97% over the past one week.

The stock of Banco Bradesco S.A. and Exxon Mobil 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: 19.80% versus 17.84%

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 BBD will grow it’s earning at a 19.80% annual rate in the next 5 years. This is in contrast to XOM which will have a positive growth at a 17.84% annual rate. This means that the higher growth rate of BBD 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. These figures suggest that XOM ventures generate a higher ROI than that of BBD.

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, BBD’s free cash flow per share is a positive 14.39, while that of XOM is negative -0.16.

Valuation

BBD currently trades at a forward P/E of 10.73, a P/B of 2.02, and a P/S of 3.46 while XOM trades at a forward P/E of 16.09, a P/B of 1.77, and a P/S of 1.40. This means that looking at the earnings, book values and sales basis, BBD 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 BBD is currently at a -11.8% to its one-year price target of 11.19. Looking at its rival pricing, XOM is at a -9.47% relative to its price target of 85.98.




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), BBD is given a 2.50 while 2.70 placed for XOM. This means that analysts are more bullish on the outlook for XOM 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 BBD is 0.89 while that of XOM is just 1.92. This means that analysts are more bullish on the forecast for BBD stock.

Conclusion

The stock of Exxon Mobil Corporation defeats that of Banco Bradesco S.A. when the two are compared, with XOM taking 5 out of the total factors that were been considered. XOM 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, XOM is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for XOM is better on when it is viewed on short interest.

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