The shares of Vale S.A. have decreased by more than -7.96% this year alone. The shares recently went up by 3.23% or $0.38 and now trades at $12.14. The shares of Walgreens Boots Alliance, Inc. (NASDAQ:WBA), has slumped by -13.26% year to date as of 12/02/2019. The shares currently trade at $59.27 and have been able to report a change of -2.19% over the past one week.
The stock of Vale S.A. and Walgreens Boots Alliance, 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.
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. VALE has an EBITDA margin of 18.64%, this implies that the underlying business of VALE is more profitable. The ROI of VALE is 19.20% while that of WBA is 10.90%. These figures suggest that VALE ventures generate a higher ROI than that of WBA.
The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, VALE’s free cash flow per share is a positive 32.54, while that of WBA is positive 1.1.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 VALE is 1.40 and that of WBA is 0.70. This implies that it is easier for VALE to cover its immediate obligations over the next 12 months than WBA. The debt ratio of VALE is 0.40 compared to 0.72 for WBA. WBA can be able to settle its long-term debts and thus is a lower financial risk than VALE.
VALE currently trades at a forward P/E of 7.29, a P/B of 1.51, and a P/S of 1.89 while WBA trades at a forward P/E of 9.62, a P/B of 2.27, and a P/S of 0.39. This means that looking at the earnings, book values and sales basis, VALE 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 VALE is currently at a -15.22% to its one-year price target of 14.32. Looking at its rival pricing, WBA is at a 4.07% relative to its price target of 56.95.
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), VALE is given a 2.50 while 3.10 placed for WBA. This means that analysts are more bullish on the outlook for WBA 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 VALE is 1.57 while that of WBA is just 3.48. This means that analysts are more bullish on the forecast for VALE stock.
The stock of Walgreens Boots Alliance, Inc. defeats that of Vale S.A. when the two are compared, with WBA taking 3 out of the total factors that were been considered. WBA 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, WBA is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for WBA is better on when it is viewed on short interest.