The shares of Toll Brothers, Inc. (NYSE:TOL) and Electronic Arts Inc. (NASDAQ:EA) were among the active stocks of the last trading sessions. Toll Brothers, Inc. (NYSE:TOL) declined to -0.48% closing at the price of $33.5 whereas the shares of Electronic Arts Inc. (NASDAQ:EA) soared 3.54% with the increase of 3.22 points closing at the price of $94.2. Toll Brothers, Inc. has currently decrease -22.88% in its stock over the period of 6-months while its rival Electronic Arts Inc. subtracted -23.81% 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 Toll Brothers, Inc. (NYSE:TOL) is 4.7% while the ROI of Electronic Arts Inc. (NASDAQ:EA) is 22.6%. Another figure that is to be considered while analyzing the profitability of a share is its EBITDA margin, TOL’s EBITDA Margin is 9.62 whereas EA’s is 23.17.
Both the profitability ratios suggest that Electronic Arts Inc. (NASDAQ:EA) is more suitable investment in terms of profitability and return.
EPS & Surprise Factor
Toll Brothers, Inc. (NYSE:TOL) reported $1.26/share EPS for the previous quarter where analysts were predicting an EPS to be $1.03/share Thus beating the analyst Estimates with a Surprise Factor of 22.3 Percent. While, Electronic Arts Inc. (NASDAQ:EA) reported EPS of $0.88/share in the last quarter. The analysts projected EPS of $0.58/share depicting a Surprise of 51.7 Percent.
Taking a look at Earnings per Share, Electronic Arts Inc. tends to be beating the analyst estimates more than Toll Brothers, Inc.. so EA is more profitable than TOL.
Technical Analysis of Toll Brothers, Inc. & Electronic Arts Inc.
Moving average convergence divergence (MACD) shows that Toll Brothers, Inc. (NYSE:TOL) is on a PRICE RELATIVITY trend While Electronic Arts Inc. (NASDAQ:EA) is on PRICE RELATIVITY trend. The trend for the past 10-days shows that the Toll Brothers, Inc. was in BULLISH territory and Electronic Arts Inc. was in BEARISH territory.
TOL’s current statistics gauge that the stock candle is BULLISH with HIGH volatility. While EA’s candle is BULLISH with HIGH.
EPS Growth Rate: TOL’s 14.35% versus EA’s 14.3%
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 Toll Brothers, Inc. (NYSE:TOL) is predicted at 14.35% while Electronic Arts Inc. (NASDAQ:EA) stands at 14.3%. These numbers suggest that TOL 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 TOL stands at 0 while EA is at 3.8 whereas the debt ratio of the prior is 0.8 while the debt ratio of the later is 0.19.
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 2.6 for TOL and 1.8 for EA which means TOL has Hold rating whereas EA 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 TOL is $41.21 which is 18.71% of its current price while EA has price target of 139.96 which is 32.7% 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.
TOL currently has price to earning P/E ratio of 8.93 whereas EA has 31.65 while the forward P/E ratio for the prior stands at 6.59 and for the later it depicts the value of 17.43.
The price to Book P/B for TOL is 1.12, Price to Sale is at 0.71 and for EA these ratios stand at 5.48 and 6.08.