Earnings

Teva Pharmaceutical Industries Limited (TEVA) is better stock pick than Santander Consumer USA Holdings Inc. (SC)

The shares of Teva Pharmaceutical Industries Limited have decreased by more than -4.75% this year alone. The shares recently went down by -0.72% or -$0.13 and now trades at $18.05. The shares of Santander Consumer USA Holdings Inc. (NYSE:SC), has slumped by -15.20% year to date as of 04/13/2018. The shares currently trade at $15.79 and have been able to report a change of -0.25% over the past one week.

The stock of Teva Pharmaceutical Industries Limited and Santander Consumer USA Holdings 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: -5.45% versus 1.90%

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 TEVA will grow it’s earning at a -5.45% annual rate in the next 5 years. This is in contrast to SC which will have a positive growth at a 1.90% annual rate. This means that the higher growth rate of SC 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 TEVA is -36.00% while that of SC is 1.40%. These figures suggest that SC ventures generate a higher ROI than that of TEVA.

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, TEVA’s free cash flow per share is a positive 10.95, while that of SC is negative -17.03.

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 TEVA is 2.37 compared to 4.81 for SC. SC can be able to settle its long-term debts and thus is a lower financial risk than TEVA.

Valuation

TEVA currently trades at a forward P/E of 6.50, a P/B of 1.34, and a P/S of 0.83 while SC trades at a forward P/E of 6.79, a P/B of 0.88, and a P/S of 0.87. This means that looking at the earnings, book values and sales basis, TEVA 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 TEVA is currently at a -6.43% to its one-year price target of 19.29. Looking at its rival pricing, SC is at a -21.68% relative to its price target of 20.16.

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), TEVA is given a 3.10 while 2.40 placed for SC. This means that analysts are more bullish on the outlook for TEVA 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 TEVA is 4.21 while that of SC is just 2.30. This means that analysts are more bullish on the forecast for SC stock.

Conclusion

The stock of Teva Pharmaceutical Industries Limited defeats that of Santander Consumer USA Holdings Inc. when the two are compared, with TEVA taking 7 out of the total factors that were been considered. TEVA 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, TEVA is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for TEVA is better on when it is viewed on short interest.

Previous ArticleNext Article

Related Post

Dissecting the Numbers for Great Southern Bancorp,... Great Southern Bancorp, Inc. (NASDAQ:GSBC) shares are down more than -3.87% this year and recently decreased -2.42% or -$1.2 to settle at $48.45. Guar...
Uncovering the next great stocks: Continental Reso... The shares of Continental Resources, Inc. have increased by more than 14.65% this year alone. The shares recently went up by 3.23% or $1.9 and now tra...
Transocean Ltd. (RIG) vs. Bill Barrett Corporation... Transocean Ltd. (NYSE:RIG) and Bill Barrett Corporation (NYSE:BBG) are the two most active stocks in the Oil & Gas Drilling & Exploration indu...
Dissecting the Numbers for AbbVie Inc. (ABBV) and ... AbbVie Inc. (NYSE:ABBV) shares are down more than -2.13% this year and recently increased 0.40% or $0.38 to settle at $94.65. BB&T Corporation (NY...
Choosing Between Brinker International, Inc. (EAT)... Brinker International, Inc. (NYSE:EAT) shares are down more than -31.88% this year and recently increased 1.17% or $0.39 to settle at $33.74. Bloomin'...