Earnings

Which is more compelling pick right now? – Apogee Enterprises, Inc. (APOG), Brookdale Senior Living Inc. (BKD)

The shares of Apogee Enterprises, Inc. have decreased by more than -7.11% this year alone. The shares recently went down by -11.90% or -$5.74 and now trades at $42.48. The shares of Brookdale Senior Living Inc. (NYSE:BKD), has slumped by -2.78% year to date as of 09/18/2018. The shares currently trade at $9.43 and have been able to report a change of 0.00% over the past one week.

The stock of Apogee Enterprises, Inc. and Brookdale Senior Living Inc. were two of the most active stocks on Tuesday. 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: 12.50% versus 10.00%

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 APOG will grow it’s earning at a 12.50% annual rate in the next 5 years. This is in contrast to BKD which will have a positive growth at a 10.00% annual rate. This means that the higher growth rate of APOG 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. APOG has an EBITDA margin of 12.27%, this implies that the underlying business of APOG is more profitable. The ROI of APOG is 11.00% while that of BKD is -5.70%. These figures suggest that APOG ventures generate a higher ROI than that of BKD.

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, APOG’s free cash flow per share is a positive 0.87, while that of BKD is positive 0.32.

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 APOG is 1.70 and that of BKD is 0.70. This implies that it is easier for APOG to cover its immediate obligations over the next 12 months than BKD. The debt ratio of APOG is 0.41 compared to 5.23 for BKD. BKD can be able to settle its long-term debts and thus is a lower financial risk than APOG.

Valuation

APOG currently trades at a forward P/E of 10.73, a P/B of 2.28, and a P/S of 0.86 while BKD trades at a P/B of 1.92, and a P/S of 0.39. This means that looking at the earnings, book values and sales basis, APOG 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 APOG is currently at a -23.46% to its one-year price target of 55.50. Looking at its rival pricing, BKD is at a -1.57% relative to its price target of 9.58.

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), APOG is given a 1.80 while 2.30 placed for BKD. This means that analysts are more bullish on the outlook for BKD 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 APOG is 12.89 while that of BKD is just 9.51. This means that analysts are more bullish on the forecast for BKD stock.

Conclusion

The stock of Brookdale Senior Living Inc. defeats that of Apogee Enterprises, Inc. when the two are compared, with BKD taking 4 out of the total factors that were been considered. BKD 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, BKD is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for BKD is better on when it is viewed on short interest.

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