Earnings

Which Market Offer More Value? – eBay Inc. (EBAY), The Boeing Company (BA)

The shares of eBay Inc. have increased by more than 5.72% this year alone. The shares recently went down by -1.55% or -$0.63 and now trades at $39.90. The shares of The Boeing Company (NYSE:BA), has jumped by 11.65% year to date as of 04/13/2018. The shares currently trade at $329.28 and have been able to report a change of 0.97% over the past one week.

The stock of eBay Inc. and The Boeing 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: 11.99% versus 18.10%

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 EBAY will grow it’s earning at a 11.99% annual rate in the next 5 years. This is in contrast to BA which will have a positive growth at a 18.10% annual rate. This means that the higher growth rate of BA 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. EBAY has an EBITDA margin of 47.05%, this implies that the underlying business of EBAY is more profitable. The ROI of EBAY is 11.50% while that of BA is 64.30%. These figures suggest that BA ventures generate a higher ROI than that of EBAY.

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, EBAY’s free cash flow per share is a positive 8, while that of BA is positive 1.7.

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 EBAY is 2.20 and that of BA is 1.20. This implies that it is easier for EBAY to cover its immediate obligations over the next 12 months than BA. The debt ratio of EBAY is 1.24 compared to 31.32 for BA. BA can be able to settle its long-term debts and thus is a lower financial risk than EBAY.

Valuation

EBAY currently trades at a forward P/E of 15.29, a P/B of 5.12, and a P/S of 4.29 while BA trades at a forward P/E of 19.71, a P/B of 548.80, and a P/S of 2.12. This means that looking at the earnings, book values and sales basis, EBAY 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 EBAY is currently at a -16.05% to its one-year price target of 47.53. Looking at its rival pricing, BA is at a -14.73% relative to its price target of 386.17.

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), EBAY is given a 2.40 while 2.10 placed for BA. This means that analysts are more bullish on the outlook for EBAY 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 EBAY is 2.49 while that of BA is just 1.05. This means that analysts are more bullish on the forecast for BA stock.

Conclusion

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

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