The shares of Alphabet Inc. (NASDAQ:GOOG) and Cummins Inc. (NYSE:CMI) were among the active stocks of the last trading sessions. Alphabet Inc. (NASDAQ:GOOG) declined to -2.48% closing at the price of $1087.97 whereas the shares of Cummins Inc. (NYSE:CMI) declined -3.41% with the decrease of -4.99 points closing at the price of $141.2. Alphabet Inc. has currently increase 1.4% in its stock over the period of 6-months while its rival Cummins Inc. subtracted -16.34% 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 Alphabet Inc. (NASDAQ:GOOG) is 0% while the ROI of Cummins Inc. (NYSE:CMI) is 19.2%. Another figure that is to be considered while analyzing the profitability of a share is its EBITDA margin, GOOG’s EBITDA Margin is 17.74 whereas CMI’s is 9.45.
Both the profitability ratios suggest a mixed sentiment for Alphabet Inc. (NASDAQ:GOOG) and Cummins Inc. (NYSE:CMI).
EPS & Surprise Factor
Alphabet Inc. (NASDAQ:GOOG) reported $4.54/share EPS for the previous quarter where analysts were predicting an EPS to be $9.54/share Thus lagging the analyst Estimates with a Surprise Factor of -52.4 Percent. While, Cummins Inc. (NYSE:CMI) reported EPS of $3.29/share in the last quarter. The analysts projected EPS of $3.63/share depicting a Surprise of -9.4 Percent.
Taking a look at Earnings per Share, Cummins Inc. tends to be beating the analyst estimates more than Alphabet Inc.. so CMI is more profitable than GOOG.
Technical Analysis of Alphabet Inc. & Cummins Inc.
Moving average convergence divergence (MACD) shows that Alphabet Inc. (NASDAQ:GOOG) is on a PRICE RELATIVITY trend While Cummins Inc. (NYSE:CMI) is on PRICE RELATIVITY trend. The trend for the past 10-days shows that the Alphabet Inc. was in BEARISH territory and Cummins Inc. was in BEARISH territory.
GOOG’s current statistics gauge that the stock candle is BEARISH with HIGH volatility. While CMI’s candle is BEARISH with HIGH.
EPS Growth Rate: GOOG’s 17.37% versus CMI’s 12.4%
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 Alphabet Inc. (NASDAQ:GOOG) is predicted at 17.37% while Cummins Inc. (NYSE:CMI) stands at 12.4%. These numbers suggest that GOOG 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 GOOG stands at 0 while CMI is at 1.6 whereas the debt ratio of the prior is 0 while the debt ratio of the later is 0.34.
The values of the both ratios suggest that CMI 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 1.6 for GOOG and 2.8 for CMI which means GOOG has Buy rating whereas CMI 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 GOOG is $1354 which is 19.65% of its current price while CMI has price target of 158.75 which is 11.06% 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.
GOOG currently has price to earning P/E ratio of 46.99 whereas CMI has 12.24 while the forward P/E ratio for the prior stands at 22.66 and for the later it depicts the value of 9.33.
The price to Book P/B for GOOG is 4.67, Price to Sale is at 5.98 and for CMI these ratios stand at 3.17 and 1.03.