The shares of Smith (A.O.) Corporation (NYSE:AOS) and Lam Research Corporation (NASDAQ:LRCX) were among the active stocks of the last trading sessions. Smith (A.O.) Corporation (NYSE:AOS) declined to -1.28% closing at the price of $47.87 whereas the shares of Lam Research Corporation (NASDAQ:LRCX) declined -1.55% with the decrease of -2.16 points closing at the price of $137.62. Smith (A.O.) Corporation has currently decrease -24.96% in its stock over the period of 6-months while its rival Lam Research Corporation subtracted -32.45% 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 Smith (A.O.) Corporation (NYSE:AOS) is 18.4% while the ROI of Lam Research Corporation (NASDAQ:LRCX) is 33.3%. Another figure that is to be considered while analyzing the profitability of a share is its EBITDA margin, AOS’s EBITDA Margin is 13.51 whereas LRCX’s is 5.87.
Both the profitability ratios suggest a mixed sentiment for Smith (A.O.) Corporation (NYSE:AOS) and Lam Research Corporation (NASDAQ:LRCX).
EPS & Surprise Factor
Smith (A.O.) Corporation (NYSE:AOS) reported $0.66/share EPS for the previous quarter where analysts were predicting an EPS to be $0.62/share Thus beating the analyst Estimates with a Surprise Factor of 6.5 Percent. While, Lam Research Corporation (NASDAQ:LRCX) reported EPS of $5.31/share in the last quarter. The analysts projected EPS of $4.94/share depicting a Surprise of 7.5 Percent.
Taking a look at Earnings per Share, Lam Research Corporation tends to be beating the analyst estimates more than Smith (A.O.) Corporation. so LRCX is more profitable than AOS.
Technical Analysis of Smith (A.O.) Corporation & Lam Research Corporation
Moving average convergence divergence (MACD) shows that Smith (A.O.) Corporation (NYSE:AOS) is on a PRICE RELATIVITY trend While Lam Research Corporation (NASDAQ:LRCX) is on PRICE RELATIVITY trend. The trend for the past 10-days shows that the Smith (A.O.) Corporation was in BEARISH territory and Lam Research Corporation was in BEARISH territory.
AOS’s current statistics gauge that the stock candle is BEARISH with HIGH volatility. While LRCX’s candle is BEARISH with HIGH.
EPS Growth Rate: AOS’s 11.3% versus LRCX’s 13.12%
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 Smith (A.O.) Corporation (NYSE:AOS) is predicted at 11.3% while Lam Research Corporation (NASDAQ:LRCX) stands at 13.12%. These numbers suggest that LRCX 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 AOS stands at 2.2 while LRCX is at 2.9 whereas the debt ratio of the prior is 0.14 while the debt ratio of the later is 0.38.
The values of the both ratios suggest that LRCX is more suitable investment when the liquidity and risk is the main concern.
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 AOS and 2.1 for LRCX which means AOS has Hold rating whereas LRCX 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 AOS is $66.56 which is 28.08% of its current price while LRCX has price target of 222.53 which is 38.16% 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.
AOS currently has price to earning P/E ratio of 20.49 whereas LRCX has 8.07 while the forward P/E ratio for the prior stands at 16.42 and for the later it depicts the value of 7.82.
The price to Book P/B for AOS is 4.73, Price to Sale is at 2.64 and for LRCX these ratios stand at 3.41 and 1.91.