The shares of The Walt Disney Company have increased by more than 23.84% this year alone. The shares recently went down by -2.19% or -$3.04 and now trades at $135.79. The shares of Seadrill Limited (NYSE:SDRL), has slumped by -66.15% year to date as of 09/10/2019. The shares currently trade at $3.30 and have been able to report a change of 47.32% over the past one week.
The stock of The Walt Disney Company and Seadrill Limited 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 DIS will grow it’s earning at a -2.49% annual rate in the next 5 years. This is in contrast to SDRL which will have a positive growth at a 31.10% annual rate. This means that the higher growth rate of SDRL 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. DIS has an EBITDA margin of 28.98%, this implies that the underlying business of DIS is more profitable. These figures suggest that DIS ventures generate a higher ROI than that of SDRL.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, DIS’s free cash flow per share is a negative -4.88, while that of SDRL is also a negative -42.74.
DIS currently trades at a forward P/E of 23.16, a P/B of 2.70, and a P/S of 3.78 while SDRL trades at a P/B of 0.14, and a P/S of 0.31. This means that looking at the earnings, book values and sales basis, DIS 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 DIS is currently at a -10.81% to its one-year price target of 152.24. Looking at its rival pricing, SDRL is at a -68.57% relative to its price target of 10.50.
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), DIS is given a 2.00 while 2.00 placed for SDRL. This means that analysts are equally bullish on their outlook for the two stocks 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 DIS is 1.93 while that of SDRL is just 7.93. This means that analysts are more bullish on the forecast for DIS stock.
The stock of The Walt Disney Company defeats that of Seadrill Limited when the two are compared, with DIS taking 5 out of the total factors that were been considered. DIS 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, DIS is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for DIS is better on when it is viewed on short interest.