Earnings

Financially Devastating or Fantastic? – HighPoint Resources Corporation (HPR), AVEO Pharmaceuticals, Inc. (AVEO)

The shares of HighPoint Resources Corporation have decreased by more than -11.89% this year alone. The shares recently went down by -0.44% or -$0.02 and now trades at $4.52. The shares of AVEO Pharmaceuticals, Inc. (NASDAQ:AVEO), has slumped by -1.79% year to date as of 10/10/2018. The shares currently trade at $2.74 and have been able to report a change of -5.52% over the past one week.

The stock of HighPoint Resources Corporation and AVEO Pharmaceuticals, Inc. were two of the most active stocks on Wednesday. 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.

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. HPR has an EBITDA margin of 24.71%, this implies that the underlying business of HPR is more profitable. The ROI of HPR is -6.00% while that of AVEO is 129.70%. These figures suggest that AVEO ventures generate a higher ROI than that of HPR.

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, HPR’s free cash flow per share is a negative -0.05, while that of AVEO is also a negative -0.11.

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 HPR is 0.70 and that of AVEO is 1.20. This implies that it is easier for HPR to cover its immediate obligations over the next 12 months than AVEO.

Valuation

HPR currently trades at a forward P/E of 5.76, a P/B of 0.93, and a P/S of 2.92 while AVEO trades at a P/S of 53.33. This means that looking at the earnings, book values and sales basis, HPR 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 HPR is currently at a -46% to its one-year price target of 8.37. Looking at its rival pricing, AVEO is at a -50.18% relative to its price target of 5.50.




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), HPR is given a 1.90 while 2.00 placed for AVEO. This means that analysts are more bullish on the outlook for AVEO 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 HPR is 6.82 while that of AVEO is just 6.51. This means that analysts are more bullish on the forecast for AVEO stock.

Conclusion

The stock of HighPoint Resources Corporation defeats that of AVEO Pharmaceuticals, Inc. when the two are compared, with HPR taking 5 out of the total factors that were been considered. HPR 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, HPR is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for HPR is better on when it is viewed on short interest.

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