The shares of Centene Corporation have decreased by more than -13.74% this year alone. The shares recently went up by 3.69% or $1.77 and now trades at $49.73. The shares of Chico’s FAS, Inc. (NYSE:CHS), has slumped by -42.53% year to date as of 08/13/2019. The shares currently trade at $3.23 and have been able to report a change of 2.87% over the past one week.
The stock of Centene Corporation and Chico’s FAS, 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.
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 CNC will grow it’s earning at a 15.52% annual rate in the next 5 years. This is in contrast to CHS which will have a positive growth at a 10.00% annual rate. This means that the higher growth rate of CNC implies a greater potential for capital appreciation over the years.
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. CNC has an EBITDA margin of 3.91%, this implies that the underlying business of CHS is more profitable. The ROI of CNC is 5.60% while that of CHS is 4.90%. These figures suggest that CNC ventures generate a higher ROI than that of CHS.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, CNC’s free cash flow per share is a positive 1.24, while that of CHS is negative -0.61.
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 CNC is 1.10 and that of CHS is 1.10. This implies that it is easier for CNC to cover its immediate obligations over the next 12 months than CHS. The debt ratio of CNC is 0.59 compared to 0.10 for CHS. CNC can be able to settle its long-term debts and thus is a lower financial risk than CHS.Valuation
CNC currently trades at a forward P/E of 10.05, a P/B of 1.69, and a P/S of 0.30 while CHS trades at a forward P/E of 46.81, a P/B of 0.66, and a P/S of 0.19. This means that looking at the earnings, book values and sales basis, CNC 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 CNC is currently at a -32.8% to its one-year price target of 74.00. Looking at its rival pricing, CHS is at a -20.64% relative to its price target of 4.07.
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), CNC is given a 1.70 while 3.00 placed for CHS. This means that analysts are more bullish on the outlook for CHS 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 CNC is 3.89 while that of CHS is just 6.75. This means that analysts are more bullish on the forecast for CNC stock.
The stock of Chico’s FAS, Inc. defeats that of Centene Corporation when the two are compared, with CHS taking 5 out of the total factors that were been considered. CHS 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, CHS is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for CHS is better on when it is viewed on short interest.