The shares of New Gold Inc. (NYSE:NGD) and Berkshire Hathaway Inc. (NYSE:BRK-B) were among the active stocks of the last trading sessions. New Gold Inc. (NYSE:NGD) declined to -2.04% closing at the price of $0.77 whereas the shares of Berkshire Hathaway Inc. (NYSE:BRK-B) declined -0.86% with the decrease of -1.82 points closing at the price of $208.7. New Gold Inc. has currently decrease -69.08% in its stock over the period of 6-months while its rival Berkshire Hathaway Inc. added 4.28% 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 New Gold Inc. (NYSE:NGD) is -3% while the ROI of Berkshire Hathaway Inc. (NYSE:BRK-B) is 0%. Another figure that is to be considered while analyzing the profitability of a share is its EBITDA margin, NGD’s EBITDA Margin is 4.35 whereas BRK-B’s is -0.16.
Both the profitability ratios suggest a mixed sentiment for New Gold Inc. (NYSE:NGD) and Berkshire Hathaway Inc. (NYSE:BRK-B).
EPS & Surprise Factor
New Gold Inc. (NYSE:NGD) reported $0.01/share EPS for the previous quarter where analysts were predicting an EPS to be $0.01/share Thus meeting the analyst Estimates with a Surprise Factor of 0 Percent. While, Berkshire Hathaway Inc. (NYSE:BRK-B) reported EPS of $2.79/share in the last quarter. The analysts projected EPS of $2.24/share depicting a Surprise of 24.6 Percent.
Taking a look at Earnings per Share, Berkshire Hathaway Inc. tends to be beating the analyst estimates more than New Gold Inc.. so BRK-B is more profitable than NGD.
EPS Growth Rate: NGD’s 9.61% versus BRK-B’s 8.8%
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 New Gold Inc. (NYSE:NGD) is predicted at 9.61% while Berkshire Hathaway Inc. (NYSE:BRK-B) stands at 8.8%. These numbers suggest that NGD 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 NGD stands at 3 while BRK-B is at 0 whereas the debt ratio of the prior is 0.53 while the debt ratio of the later is 0.
The values of the both ratios suggest that NGD 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 2.7 for NGD and 2.2 for BRK-B which means NGD has Hold rating whereas BRK-B 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 NGD is $3.81 which is 79.79% of its current price while BRK-B has price target of 243.25 which is 14.2% 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.
NGD currently has price to earning P/E ratio of 0 whereas BRK-B has 10.84 while the forward P/E ratio for the prior stands at 0 and for the later it depicts the value of 20.58.
The price to Book P/B for NGD is 0.25, Price to Sale is at 0.64 and for BRK-B these ratios stand at 0 and 2.16.