The shares of Plains GP Holdings, L.P. have increased by more than 25.82% this year alone. The shares recently went up by 1.48% or $0.37 and now trades at $25.29. The shares of LATAM Airlines Group S.A. (NYSE:LTM), has slumped by -0.97% year to date as of 07/10/2019. The shares currently trade at $10.20 and have been able to report a change of 11.96% over the past one week.
The stock of Plains GP Holdings, L.P. and LATAM Airlines Group S.A. were two of the most active stocks on Wednesday. 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 PAGP will grow it’s earning at a -10.10% annual rate in the next 5 years. This is in contrast to LTM which will have a positive growth at a 62.98% annual rate. This means that the higher growth rate of LTM 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. PAGP has an EBITDA margin of 11.78%, this implies that the underlying business of PAGP is more profitable. The ROI of PAGP is 17.80% while that of LTM is 6.40%. These figures suggest that PAGP ventures generate a higher ROI than that of LTM.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, PAGP’s free cash flow per share is a positive 2.07, while that of LTM is negative -327.06.
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 PAGP is 1.00 and that of LTM is 0.60. This implies that it is easier for PAGP to cover its immediate obligations over the next 12 months than LTM. The debt ratio of PAGP is 4.77 compared to 2.33 for LTM. PAGP can be able to settle its long-term debts and thus is a lower financial risk than LTM.Valuation
PAGP currently trades at a forward P/E of 12.51, a P/B of 2.06, and a P/S of 0.20 while LTM trades at a forward P/E of 15.04, a P/B of 1.89, and a P/S of 0.63. This means that looking at the earnings, book values and sales basis, PAGP 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 PAGP is currently at a -9.09% to its one-year price target of 27.82. Looking at its rival pricing, LTM is at a -14.79% relative to its price target of 11.97.
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), PAGP is given a 1.80 while 2.90 placed for LTM. This means that analysts are more bullish on the outlook for LTM 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 PAGP is 2.48 while that of LTM is just 16.69. This means that analysts are more bullish on the forecast for PAGP stock.
The stock of LATAM Airlines Group S.A. defeats that of Plains GP Holdings, L.P. when the two are compared, with LTM taking 4 out of the total factors that were been considered. LTM 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, LTM is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for LTM is better on when it is viewed on short interest.