Earnings

Taking Tally Of GGP Inc. (GGP), Southern Copper Corporation (SCCO)

The shares of GGP Inc. have decreased by more than -15.35% this year alone. The shares recently went down by -0.25% or -$0.05 and now trades at $19.80. The shares of Southern Copper Corporation (NYSE:SCCO), has jumped by 15.70% year to date as of 04/13/2018. The shares currently trade at $54.90 and have been able to report a change of 0.33% over the past one week.

The stock of GGP Inc. and Southern Copper 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: 5.70% versus 21.40%

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 GGP will grow it’s earning at a 5.70% annual rate in the next 5 years. This is in contrast to SCCO which will have a positive growth at a 21.40% annual rate. This means that the higher growth rate of SCCO 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. GGP has an EBITDA margin of 74.49%, this implies that the underlying business of GGP is more profitable. The ROI of GGP is 4.10% while that of SCCO is 15.00%. These figures suggest that SCCO ventures generate a higher ROI than that of GGP.

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, GGP’s free cash flow per share is a positive 5.76, while that of SCCO is positive 2.9.

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 debt ratio of GGP is 1.52 compared to 0.98 for SCCO. GGP can be able to settle its long-term debts and thus is a lower financial risk than SCCO.

Valuation

GGP currently trades at a forward P/E of 36.26, a P/B of 2.18, and a P/S of 8.16 while SCCO trades at a forward P/E of 18.55, a P/B of 6.95, and a P/S of 6.52. This means that looking at the earnings, book values and sales basis, GGP 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 GGP is currently at a -20.32% to its one-year price target of 24.85. Looking at its rival pricing, SCCO is at a 16.19% relative to its price target of 47.25.

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), GGP is given a 2.50 while 3.40 placed for SCCO. This means that analysts are more bullish on the outlook for SCCO 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 GGP is 2.42 while that of SCCO is just 9.23. This means that analysts are more bullish on the forecast for GGP stock.

Conclusion

The stock of GGP Inc. defeats that of Southern Copper Corporation when the two are compared, with GGP taking 6 out of the total factors that were been considered. GGP 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, GGP is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for GGP is better on when it is viewed on short interest.

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