The shares of Celgene Corporation have decreased by more than -14.33% this year alone. The shares recently went down by -0.38% or -$0.34 and now trades at $89.40. The shares of Matador Resources Company (NYSE:MTDR), has jumped by 0.84% year to date as of 04/13/2018. The shares currently trade at $31.39 and have been able to report a change of 13.73% over the past one week.
The stock of Celgene Corporation and Matador 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: 19.65% versus 30.00%
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 CELG will grow it’s earning at a 19.65% annual rate in the next 5 years. This is in contrast to MTDR which will have a positive growth at a 30.00% annual rate. This means that the higher growth rate of MTDR 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. CELG has an EBITDA margin of 42.66%, this implies that the underlying business of MTDR is more profitable. The ROI of CELG is 29.40% while that of MTDR is 12.70%. These figures suggest that CELG ventures generate a higher ROI than that of MTDR.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, CELG’s free cash flow per share is a positive 11.86, while that of MTDR is negative -0.03.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 current ratio for CELG is 5.00 and that of MTDR is 0.90. This implies that it is easier for CELG to cover its immediate obligations over the next 12 months than MTDR. The debt ratio of CELG is 1.24 compared to 0.50 for MTDR. CELG can be able to settle its long-term debts and thus is a lower financial risk than MTDR.Valuation
CELG currently trades at a forward P/E of 8.79, a P/B of 9.99, and a P/S of 5.19 while MTDR trades at a forward P/E of 18.86, a P/B of 2.92, and a P/S of 6.10. This means that looking at the earnings, book values and sales basis, CELG 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 CELG is currently at a -22.68% to its one-year price target of 115.62. Looking at its rival pricing, MTDR is at a -11.65% relative to its price target of 35.53.
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), CELG is given a 2.20 while 2.00 placed for MTDR. This means that analysts are more bullish on the outlook for CELG 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 CELG is 1.96 while that of MTDR is just 7.61. This means that analysts are more bullish on the forecast for CELG stock.
The stock of Matador Resources Company defeats that of Celgene Corporation when the two are compared, with MTDR taking 6 out of the total factors that were been considered. MTDR 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, MTDR is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for MTDR is better on when it is viewed on short interest.