Which is more compelling pick right now? – BHP Billiton Limited (BHP), Pioneer Natural Resources Company (PXD)

The shares of BHP Billiton Limited have increased by more than 1.76% this year alone. The shares recently went up by 1.25% or $0.58 and now trades at $46.80. The shares of Pioneer Natural Resources Company (NYSE:PXD), has jumped by 8.95% year to date as of 04/13/2018. The shares currently trade at $188.32 and have been able to report a change of 12.01% over the past one week.

The stock of BHP Billiton Limited and Pioneer Natural Resources Company 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: 5.30% versus 52.55%

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 BHP will grow it’s earning at a 5.30% annual rate in the next 5 years. This is in contrast to PXD which will have a positive growth at a 52.55% annual rate. This means that the higher growth rate of PXD 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 BHP is 8.70% while that of PXD is 1.40%. These figures suggest that BHP ventures generate a higher ROI than that of PXD.

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, BHP’s free cash flow per share is a positive 0, while that of PXD is positive 0.56.

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 BHP is 1.70 and that of PXD is 1.40. This implies that it is easier for BHP to cover its immediate obligations over the next 12 months than PXD. The debt ratio of BHP is 0.49 compared to 0.24 for PXD. BHP can be able to settle its long-term debts and thus is a lower financial risk than PXD.


BHP currently trades at a forward P/E of 20.99, a P/B of 2.19, and a P/S of 3.02 while PXD trades at a forward P/E of 22.40, a P/B of 2.84, and a P/S of 6.05. This means that looking at the earnings, book values and sales basis, BHP 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 BHP is currently at a 5.03% to its one-year price target of 44.56. Looking at its rival pricing, PXD is at a -14.69% relative to its price target of 220.75.

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), BHP is given a 2.20 while 1.80 placed for PXD. This means that analysts are more bullish on the outlook for BHP 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 BHP is 5.58 while that of PXD is just 2.41. This means that analysts are more bullish on the forecast for PXD stock.


The stock of BHP Billiton Limited defeats that of Pioneer Natural Resources Company when the two are compared, with BHP taking 5 out of the total factors that were been considered. BHP 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, BHP is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for BHP is better on when it is viewed on short interest.

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