The shares of Horizon Therapeutics Public Limited Company have increased by more than 63.41% this year alone. The shares recently went down by -2.59% or -$0.85 and now trades at $31.93. The shares of Garrett Motion Inc. (NYSE:GTX), has slumped by -1.94% year to date as of 12/02/2019. The shares currently trade at $12.10 and have been able to report a change of 15.02% over the past one week.
The stock of Horizon Therapeutics Public Limited Company and Garrett Motion Inc. were two of the most active stocks on Monday. 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 HZNP will grow it’s earning at a 12.80% annual rate in the next 5 years. This is in contrast to GTX which will have a positive growth at a 11.90% annual rate. This means that the higher growth rate of HZNP 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. HZNP has an EBITDA margin of 25.82%, this implies that the underlying business of HZNP is more profitable. The ROI of HZNP is 0.30% while that of GTX is -28.40%. These figures suggest that HZNP ventures generate a higher ROI than that of GTX.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, HZNP’s free cash flow per share is a positive 6.67, while that of GTX is positive 1.91.
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 HZNP is 2.30 and that of GTX is 0.90. This implies that it is easier for HZNP to cover its immediate obligations over the next 12 months than GTX.Valuation
HZNP currently trades at a forward P/E of 16.54, a P/B of 3.83, and a P/S of 4.60 while GTX trades at a forward P/E of 3.83, and a P/S of 0.28. This means that looking at the earnings, book values and sales basis, HZNP 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 HZNP is currently at a -11.06% to its one-year price target of 35.90. Looking at its rival pricing, GTX is at a 12.04% relative to its price target of 10.80.
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), HZNP is given a 1.60 while 3.20 placed for GTX. This means that analysts are more bullish on the outlook for GTX 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 HZNP is 6.55 while that of GTX is just 2.57. This means that analysts are more bullish on the forecast for GTX stock.
The stock of Horizon Therapeutics Public Limited Company defeats that of Garrett Motion Inc. when the two are compared, with HZNP taking 7 out of the total factors that were been considered. HZNP 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, HZNP is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for HZNP is better on when it is viewed on short interest.