Earnings

Reliable Long-term Trend to Profit From: Travelport Worldwide Limited (TVPT), FS Investment Corporation (FSIC)

The shares of Travelport Worldwide Limited have increased by more than 15.68% this year alone. The shares recently went down by -3.20% or -$0.5 and now trades at $15.12. The shares of FS Investment Corporation (NYSE:FSIC), has slumped by -7.21% year to date as of 10/10/2018. The shares currently trade at $6.82 and have been able to report a change of -4.21% over the past one week.

The stock of Travelport Worldwide Limited and FS Investment Corporation 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.

Next 5Y EPS Growth: 3.73% versus 3.00%

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 TVPT will grow it’s earning at a 3.73% annual rate in the next 5 years. This is in contrast to FSIC which will have a positive growth at a 3.00% annual rate. This means that the higher growth rate of TVPT 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. TVPT has an EBITDA margin of 15.72%, this implies that the underlying business of TVPT is more profitable. The ROI of TVPT is 13.30% while that of FSIC is 5.10%. These figures suggest that TVPT ventures generate a higher ROI than that of FSIC.

Valuation



TVPT currently trades at a forward P/E of 9.77, and a P/S of 0.78 while FSIC trades at a forward P/E of 8.48, a P/B of 0.78, and a P/S of 3.99. This means that looking at the earnings, book values and sales basis, TVPT 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 TVPT is currently at a -27.59% to its one-year price target of 20.88. Looking at its rival pricing, FSIC is at a -22.06% relative to its price target of 8.75.

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), TVPT is given a 2.70 while 2.60 placed for FSIC. This means that analysts are more bullish on the outlook for TVPT 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 TVPT is 2.30 while that of FSIC is just 0.51. This means that analysts are more bullish on the forecast for FSIC stock.

Conclusion

The stock of FS Investment Corporation defeats that of Travelport Worldwide Limited when the two are compared, with FSIC taking 4 out of the total factors that were been considered. FSIC 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, FSIC is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for FSIC is better on when it is viewed on short interest.

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