The shares of Transocean Ltd. have decreased by more than -18.59% this year alone. The shares recently went down by -2.59% or -$0.15 and now trades at $5.65. The shares of MSCI Inc. (NYSE:MSCI), has jumped by 57.63% year to date as of 09/12/2019. The shares currently trade at $232.39 and have been able to report a change of -1.29% over the past one week.
The stock of Transocean Ltd. and MSCI Inc. were two of the most active stocks on Thursday. 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 RIG will grow it’s earning at a 4.80% annual rate in the next 5 years. This is in contrast to MSCI which will have a positive growth at a 14.30% annual rate. This means that the higher growth rate of MSCI 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. RIG has an EBITDA margin of 86.67%, this implies that the underlying business of RIG is more profitable. The ROI of RIG is -6.00% while that of MSCI is 23.00%. These figures suggest that MSCI ventures generate a higher ROI than that of RIG.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, RIG’s free cash flow per share is a positive 2.23, while that of MSCI is positive 9.86.
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 RIG is 2.90 and that of MSCI is 1.70. This implies that it is easier for RIG to cover its immediate obligations over the next 12 months than MSCI.Valuation
RIG currently trades at a P/B of 0.27, and a P/S of 1.10 while MSCI trades at a forward P/E of 32.52, and a P/S of 13.01. This means that looking at the earnings, book values and sales basis, RIG 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 RIG is currently at a -44.28% to its one-year price target of 10.14. Looking at its rival pricing, MSCI is at a -6.11% relative to its price target of 247.50.
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), RIG is given a 2.30 while 2.50 placed for MSCI. This means that analysts are more bullish on the outlook for MSCI 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 RIG is 3.36 while that of MSCI is just 2.22. This means that analysts are more bullish on the forecast for MSCI stock.
The stock of Transocean Ltd. defeats that of MSCI Inc. when the two are compared, with RIG taking 6 out of the total factors that were been considered. RIG 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, RIG is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for RIG is better on when it is viewed on short interest.