The shares of Medtronic plc (NYSE:MDT) and Electronic Arts Inc. (NASDAQ:EA) were among the active stocks of the last trading sessions. Medtronic plc (NYSE:MDT) declined to -1.23% closing at the price of $95.97 whereas the shares of Electronic Arts Inc. (NASDAQ:EA) declined -2.73% with the decrease of -3.11 points closing at the price of $110.62. Medtronic plc has currently increase 21.04% in its stock over the period of 6-months while its rival Electronic Arts Inc. subtracted -8.36% in the previous 6-months.
Now we have to analyze the facts that if the stocks were worthy off investors’ money? The facts to analyze here are risks, profitability, returns and price trends.
Returns and Profitability
Profitability and returns are the main reason of investment, the investors are looking for profits that they get and return they should expect over the period of time.
The first and foremost return that is considered while making an investment is the ROI or Return on Investment. The ROI is the ratio between the profit against the cost of investment. Currently the ROI of Medtronic plc (NYSE:MDT) is 8.5% while the ROI of Electronic Arts Inc. (NASDAQ:EA) is 22.6%. Another figure that is to be considered while analyzing the profitability of a share is its EBITDA margin, MDT’s EBITDA Margin is 15.3 whereas EA’s is 27.11.
Both the profitability ratios suggest that Electronic Arts Inc. (NASDAQ:EA) is more suitable investment in terms of profitability and return.
EPS & Surprise Factor
Medtronic plc (NYSE:MDT) reported $1.17/share EPS for the previous quarter where analysts were predicting an EPS to be $1.11/share Thus beating the analyst Estimates with a Surprise Factor of 5.4 Percent. While, Electronic Arts Inc. (NASDAQ:EA) reported EPS of $0.15/share in the last quarter. The analysts projected EPS of $0.06/share depicting a Surprise of 150 Percent.
Taking a look at Earnings per Share, Electronic Arts Inc. tends to be beating the analyst estimates more than Medtronic plc. so EA is more profitable than MDT.
Technical Analysis of Medtronic plc & Electronic Arts Inc.
Moving average convergence divergence (MACD) shows that Medtronic plc (NYSE:MDT) is on a PRICE RELATIVITY trend While Electronic Arts Inc. (NASDAQ:EA) is on PRICE RELATIVITY trend. The trend for the past 10-days shows that the Medtronic plc was in BEARISH territory and Electronic Arts Inc. was in BEARISH territory.
MDT’s current statistics gauge that the stock candle is BEARISH with HIGH volatility. While EA’s candle is BEARISH with HIGH.
EPS Growth Rate: MDT’s 7% versus EA’s 14.3%
Another shareholder value can be analyzed through the EPS growth rate; the next 5 years EPS growth rate is predicted by the analysts after the analyzing the previous trends. The next 5 year EPS growth rate of Medtronic plc (NYSE:MDT) is predicted at 7% while Electronic Arts Inc. (NASDAQ:EA) stands at 14.3%. These numbers suggest that EA is more suitable investment in terms of EPS growth rate.
Financial Risk and Liquidity Concerns
The current ratio and the debt ratio are the two ratios that show the investor how quickly the company is able to payout its debt and how quickly it can cover its obligations. The current ratio of MDT stands at 2.5 while EA is at 3.8 whereas the debt ratio of the prior is 0.5 while the debt ratio of the later is 0.19.
The values of the both ratios suggest that one is more liquid and other investment is more risk free.
While making an investment, another main factor to consider before investing is the analyst recommendation on the scale of 1 to 5 where 1 is strong buy, 2 is buy, 3 is hold, 4 is Sell and 5 is strong sell. Analyst recommend 2.2 for MDT and 1.8 for EA which means MDT has Hold rating whereas EA has Buy rating.
Another recommendation of analyst that is to be considered worthy is the price target. The mare price or price trend does not suggest the suitability of a stock. The price target set by analyst is also to be considered while investing as it suggests to what extent the stock will rise or fall in the near future. The price target set for MDT is $103.15 which is 6.96% of its current price while EA has price target of 141 which is 21.55% of its current price.
Valuation is the process of determining the company’s worth for an investor, the valuation ratios give an insight to that worthiness.
MDT currently has price to earning P/E ratio of 23.29 whereas EA has 37.17 while the forward P/E ratio for the prior stands at 17.29 and for the later it depicts the value of 20.45.
The price to Book P/B for MDT is 2.58, Price to Sale is at 4.33 and for EA these ratios stand at 6.44 and 6.99.