The shares of Baxter International Inc. (NYSE:BAX) and Medtronic plc (NYSE:MDT) were among the active stocks of the last trading sessions. Baxter International Inc. (NYSE:BAX) declined to -0.48% closing at the price of $72.98 whereas the shares of Medtronic plc (NYSE:MDT) soared 0.23% with the increase of 0.22 points closing at the price of $96.19. Baxter International Inc. has currently increase 12.38% in its stock over the period of 6-months while its rival Medtronic plc added 22.39% 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 Baxter International Inc. (NYSE:BAX) is 10.9% while the ROI of Medtronic plc (NYSE:MDT) is 8.5%. Another figure that is to be considered while analyzing the profitability of a share is its EBITDA margin, BAX’s EBITDA Margin is 17.12 whereas MDT’s is 15.3.
Both the profitability ratios suggest that Baxter International Inc. (NYSE:BAX) is more suitable investment in terms of profitability and return.
EPS & Surprise Factor
Baxter International Inc. (NYSE:BAX) reported $0.77/share EPS for the previous quarter where analysts were predicting an EPS to be $0.71/share Thus beating the analyst Estimates with a Surprise Factor of 8.5 Percent. While, Medtronic plc (NYSE:MDT) reported EPS of $1.17/share in the last quarter. The analysts projected EPS of $1.11/share depicting a Surprise of 5.4 Percent.
Taking a look at Earnings per Share, Baxter International Inc. tends to be beating the analyst estimates more than Medtronic plc. so BAX is more profitable than MDT.
Technical Analysis of Baxter International Inc. & Medtronic plc
Moving average convergence divergence (MACD) shows that Baxter International Inc. (NYSE:BAX) is on a PRICE RELATIVITY trend While Medtronic plc (NYSE:MDT) is on PRICE RELATIVITY trend. The trend for the past 10-days shows that the Baxter International Inc. was in BEARISH territory and Medtronic plc was in BEARISH territory.
BAX’s current statistics gauge that the stock candle is BEARISH with HIGH volatility. While MDT’s candle is BULLISH with HIGH.
EPS Growth Rate: BAX’s 13% versus MDT’s 7%
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 Baxter International Inc. (NYSE:BAX) is predicted at 13% while Medtronic plc (NYSE:MDT) stands at 7%. These numbers suggest that BAX 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 BAX stands at 2.6 while MDT is at 2.5 whereas the debt ratio of the prior is 0.39 while the debt ratio of the later is 0.5.
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 2.3 for BAX and 2.2 for MDT which means BAX has Hold rating whereas MDT 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 BAX is $79.62 which is 8.34% of its current price while MDT has price target of 103.15 which is 6.75% 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.
BAX currently has price to earning P/E ratio of 26.61 whereas MDT has 23.35 while the forward P/E ratio for the prior stands at 22.12 and for the later it depicts the value of 17.33.
The price to Book P/B for BAX is 4.4, Price to Sale is at 3.55 and for MDT these ratios stand at 2.59 and 4.34.