Deciding Between Hot Stocks: The Boeing Company (BA), Kulicke and Soffa Industries, Inc. (KLIC)

The shares of The Boeing Company have increased by more than 11.10% this year alone. The shares recently went up by 2.05% or $7.2 and now trades at $358.29. The shares of Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC), has jumped by 25.56% year to date as of 11/05/2019. The shares currently trade at $25.45 and have been able to report a change of 5.78% over the past one week.

The stock of The Boeing Company and Kulicke and Soffa Industries, 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: 9.41% versus 20.00%

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 BA will grow it’s earning at a 9.41% annual rate in the next 5 years. This is in contrast to KLIC which will have a positive growth at a 20.00% annual rate. This means that the higher growth rate of KLIC 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. BA has an EBITDA margin of 8.28%, this implies that the underlying business of KLIC is more profitable. The ROI of BA is 76.40% while that of KLIC is 16.80%. These figures suggest that BA ventures generate a higher ROI than that of KLIC.

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, BA’s free cash flow per share is a negative -3.96.

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 BA is 1.10 and that of KLIC is 4.90. This implies that it is easier for BA to cover its immediate obligations over the next 12 months than KLIC.

Valuation

BA currently trades at a forward P/E of 16.81, and a P/S of 2.18 while KLIC trades at a forward P/E of 20.30, a P/B of 2.09, and a P/S of 2.81. This means that looking at the earnings, book values and sales basis, BA 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 BA is currently at a -5.63% to its one-year price target of 379.67. Looking at its rival pricing, KLIC is at a -3.96% relative to its price target of 26.50.

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), BA is given a 2.50 while 2.50 placed for KLIC. 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 BA is 1.24 while that of KLIC is just 6.73. This means that analysts are more bullish on the forecast for BA stock.

Conclusion

The stock of Kulicke and Soffa Industries, Inc. defeats that of The Boeing Company when the two are compared, with KLIC taking 5 out of the total factors that were been considered. KLIC 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, KLIC is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for KLIC is better on when it is viewed on short interest.