The shares of Vodafone Group Plc (NASDAQ:VOD) and International Business Machines Corporation (NYSE:IBM) were among the active stocks of the last trading sessions. Vodafone Group Plc (NASDAQ:VOD) declined to -1.77% closing at the price of $19.45 whereas the shares of International Business Machines Corporation (NYSE:IBM) declined -0.99% with the decrease of -1.16 points closing at the price of $115.67. Vodafone Group Plc has currently decrease -32.56% in its stock over the period of 6-months while its rival International Business Machines Corporation subtracted -19.24% 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 Vodafone Group Plc (NASDAQ:VOD) is 4.8% while the ROI of International Business Machines Corporation (NYSE:IBM) is 17.4%. Another figure that is to be considered while analyzing the profitability of a share is its EBITDA margin, VOD’s EBITDA Margin is 6.31 whereas IBM’s is 9.12.
Both the profitability ratios suggest that International Business Machines Corporation (NYSE:IBM) is more suitable investment in terms of profitability and return.
EPS & Surprise Factor
Technical Analysis of Vodafone Group Plc & International Business Machines Corporation
Moving average convergence divergence (MACD) shows that Vodafone Group Plc (NASDAQ:VOD) is on a PRICE RELATIVITY trend While International Business Machines Corporation (NYSE:IBM) is on PRICE RELATIVITY trend. The trend for the past 10-days shows that the Vodafone Group Plc was in BULLISH territory and International Business Machines Corporation was in BEARISH territory.
VOD’s current statistics gauge that the stock candle is BEARISH with HIGH volatility. While IBM’s candle is BEARISH with HIGH.
EPS Growth Rate: VOD’s 13.2% versus IBM’s 0.96%
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 Vodafone Group Plc (NASDAQ:VOD) is predicted at 13.2% while International Business Machines Corporation (NYSE:IBM) stands at 0.96%. These numbers suggest that VOD 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 VOD stands at 0 while IBM is at 1.3 whereas the debt ratio of the prior is 0 while the debt ratio of the later is 2.37.
The values of the both ratios suggest that IBM 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 for VOD and 2.7 for IBM which means VOD has Buy rating whereas IBM 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 VOD is $25.69 which is 24.29% of its current price while IBM has price target of 155.94 which is 25.82% 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.
VOD currently has price to earning P/E ratio of 10.74 whereas IBM has 9.44 while the forward P/E ratio for the prior stands at 14.22 and for the later it depicts the value of 8.3.
The price to Book P/B for VOD is 0.66, Price to Sale is at 0.99 and for IBM these ratios stand at 5.33 and 1.32.