Which Stock Worth Selling? Plains All American Pipeline, L.P. (PAA) or Select Income REIT (SIR)

The shares of Plains All American Pipeline, L.P. (NYSE:PAA) and Select Income REIT (NASDAQ:SIR) were among the active stocks of the last trading sessions. Plains All American Pipeline, L.P. (NYSE:PAA) soared to 0.63% closing at the price of $25.44 whereas the shares of Select Income REIT (NASDAQ:SIR) soared 0.1% with the increase of 0.02 points closing at the price of $20.84. Plains All American Pipeline, L.P. has currently increase 3.58% in its stock over the period of 6-months while its rival Select Income REIT added 8.71% 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 Plains All American Pipeline, L.P. (NYSE:PAA) is 10.4% while the ROI of Select Income REIT (NASDAQ:SIR) is 3.1%. Another figure that is to be considered while analyzing the profitability of a share is its EBITDA margin, PAA’s EBITDA Margin is 21.16 whereas SIR’s is 14.11.

Both the profitability ratios suggest that Plains All American Pipeline, L.P. (NYSE:PAA) is more suitable investment in terms of profitability and return.

EPS & Surprise Factor

Plains All American Pipeline, L.P. (NYSE:PAA) reported $0.07/share EPS for the previous quarter where analysts were predicting an EPS to be $0.22/share Thus lagging the analyst Estimates with a Surprise Factor of -68.2 Percent. While, Select Income REIT (NASDAQ:SIR) reported EPS of $0.13/share in the last quarter. The analysts projected EPS of $0.26/share depicting a Surprise of -50 Percent.

Taking a look at Earnings per Share, Select Income REIT tends to be beating the analyst estimates more than Plains All American Pipeline, L.P.. so SIR is more profitable than PAA.

Technical Analysis of Plains All American Pipeline, L.P. & Select Income REIT

Moving average convergence divergence (MACD) shows that Plains All American Pipeline, L.P. (NYSE:PAA) is on a PRICE RELATIVITY trend While Select Income REIT (NASDAQ:SIR) is on PRICE RELATIVITY trend. The trend for the past 10-days shows that the Plains All American Pipeline, L.P. was in BULLISH territory and Select Income REIT was in BEARISH territory.

PAA’s current statistics gauge that the stock candle is BULLISH with MEDIUM volatility. While SIR’s candle is BULLISH with HIGH.

EPS Growth Rate: PAA’s 12.8% versus SIR’s 6.5%

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 Plains All American Pipeline, L.P. (NYSE:PAA) is predicted at 12.8% while Select Income REIT (NASDAQ:SIR) stands at 6.5%. These numbers suggest that PAA 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 PAA stands at 0.8 while SIR is at 0 whereas the debt ratio of the prior is 1.16 while the debt ratio of the later is 1.

The values of the both ratios suggest that PAA is more suitable investment when the liquidity and risk is the main concern.

Analyst Recommendations

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 2.3 for PAA and 2.5 for SIR which means PAA has Hold rating whereas SIR has Hold 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 PAA is $27.96 which is 9.01% of its current price while SIR has price target of 25.67 which is 18.82% of its current price.

Valuation Ratios

Valuation is the process of determining the company’s worth for an investor, the valuation ratios give an insight to that worthiness.

PAA currently has price to earning P/E ratio of 14.91 whereas SIR has 23.76 while the forward P/E ratio for the prior stands at 12.41 and for the later it depicts the value of 30.65.

The price to Book P/B for PAA is 2.16, Price to Sale is at 0.62 and for SIR these ratios stand at 0.9 and 3.68.