The shares of Fred’s, Inc. (NASDAQ:FRED) and YY Inc. (NASDAQ:YY) were among the active stocks of the last trading sessions. Fred’s, Inc. (NASDAQ:FRED) soared to 4.68% closing at the price of $2.91 whereas the shares of YY Inc. (NASDAQ:YY) declined -0.07% with the decrease of -0.04 points closing at the price of $60.5. Fred’s, Inc. has currently increase 0% in its stock over the period of 6-months while its rival YY Inc. subtracted -34.87% 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 Fred’s, Inc. (NASDAQ:FRED) is -38.2% while the ROI of YY Inc. (NASDAQ:YY) is 20.4%. Another figure that is to be considered while analyzing the profitability of a share is its EBITDA margin, FRED’s EBITDA Margin is -5.51 whereas YY’s is 4.92.
Both the profitability ratios suggest that YY Inc. (NASDAQ:YY) is more suitable investment in terms of profitability and return.
EPS & Surprise Factor
Fred’s, Inc. (NASDAQ:FRED) reported $-0.56/share EPS for the previous quarter where analysts were predicting an EPS to be $-0.37/share Thus lagging the analyst Estimates with a Surprise Factor of -51.4 Percent. While, YY Inc. (NASDAQ:YY) reported EPS of $1.95/share in the last quarter. The analysts projected EPS of $1.74/share depicting a Surprise of 12.1 Percent.
Taking a look at Earnings per Share, YY Inc. tends to be beating the analyst estimates more than Fred’s, Inc.. so YY is more profitable than FRED.
Technical Analysis of Fred’s, Inc. & YY Inc.
Moving average convergence divergence (MACD) shows that Fred’s, Inc. (NASDAQ:FRED) is on a PRICE RELATIVITY trend While YY Inc. (NASDAQ:YY) is on PRICE RELATIVITY trend. The trend for the past 10-days shows that the Fred’s, Inc. was in BULLISH territory and YY Inc. was in BEARISH territory.
FRED’s current statistics gauge that the stock candle is BULLISH with HIGH volatility. While YY’s candle is BEARISH with HIGH.
EPS Growth Rate: FRED’s 0% versus YY’s 1.95%
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 Fred’s, Inc. (NASDAQ:FRED) is predicted at 0% while YY Inc. (NASDAQ:YY) stands at 1.95%. These numbers suggest that YY 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 FRED stands at 1.8 while YY is at 4.5 whereas the debt ratio of the prior is 1.26 while the debt ratio of the later is 0.04.
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 3 for FRED and 1.9 for YY which means FRED has Hold rating whereas YY 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 FRED is $2 which is -45.5% of its current price while YY has price target of 123.41 which is 50.98% 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.
FRED currently has price to earning P/E ratio of 0 whereas YY has 14.56 while the forward P/E ratio for the prior stands at 0 and for the later it depicts the value of 6.87.
The price to Book P/B for FRED is 0.83, Price to Sale is at 0.06 and for YY these ratios stand at 1.59 and 1.79.