The shares of Hormel Foods Corporation have increased by more than 3.09% this year alone. The shares recently went down by -1.21% or -$0.54 and now trades at $44.00. The shares of Thor Industries, Inc. (NYSE:THO), has jumped by 0.71% year to date as of 09/12/2019. The shares currently trade at $52.37 and have been able to report a change of 10.98% over the past one week.
The stock of Hormel Foods Corporation and Thor Industries, 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 HRL will grow it’s earning at a 5.00% annual rate in the next 5 years. This is in contrast to THO which will have a positive growth at a -1.10% annual rate. This means that the higher growth rate of HRL 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. HRL has an EBITDA margin of 14.62%, this implies that the underlying business of HRL is more profitable. The ROI of HRL is 15.40% while that of THO is 23.50%. These figures suggest that THO ventures generate a higher ROI than that of HRL.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, HRL’s free cash flow per share is a positive 0.28, while that of THO is negative -0.11.
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 HRL is 2.10 and that of THO is 1.50. This implies that it is easier for HRL to cover its immediate obligations over the next 12 months than THO. The debt ratio of HRL is 0.00 compared to 1.11 for THO. THO can be able to settle its long-term debts and thus is a lower financial risk than HRL.Valuation
HRL currently trades at a forward P/E of 25.07, a P/B of 3.99, and a P/S of 2.46 while THO trades at a forward P/E of 8.75, a P/B of 1.42, and a P/S of 0.39. This means that looking at the earnings, book values and sales basis, THO 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 HRL is currently at a 13.11% to its one-year price target of 38.90. Looking at its rival pricing, THO is at a -22.18% relative to its price target of 67.30.
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), HRL is given a 3.20 while 1.90 placed for THO. This means that analysts are more bullish on the outlook for HRL 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 HRL is 15.05 while that of THO is just 5.01. This means that analysts are more bullish on the forecast for THO stock.
The stock of Hormel Foods Corporation defeats that of Thor Industries, Inc. when the two are compared, with HRL taking 7 out of the total factors that were been considered. HRL 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, HRL is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for HRL is better on when it is viewed on short interest.