The shares of Merck & Company, Inc. (NYSE:MRK) and General Motors Company (NYSE:GM) were among the active stocks of the last trading sessions. Merck & Company, Inc. (NYSE:MRK) declined to -1.16% closing at the price of $72.27 whereas the shares of General Motors Company (NYSE:GM) declined -1.21% with the decrease of -0.44 points closing at the price of $36.03. Merck & Company, Inc. has currently increase 25.95% in its stock over the period of 6-months while its rival General Motors Company subtracted -0.85% 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 Merck & Company, Inc. (NYSE:MRK) is 8.7% while the ROI of General Motors Company (NYSE:GM) is 4.5%. Another figure that is to be considered while analyzing the profitability of a share is its EBITDA margin, MRK’s EBITDA Margin is 17.51 whereas GM’s is 6.44.
Both the profitability ratios suggest that Merck & Company, Inc. (NYSE:MRK) is more suitable investment in terms of profitability and return.
EPS & Surprise Factor
Merck & Company, Inc. (NYSE:MRK) reported $1.19/share EPS for the previous quarter where analysts were predicting an EPS to be $1.14/share Thus beating the analyst Estimates with a Surprise Factor of 4.4 Percent. While, General Motors Company (NYSE:GM) reported EPS of $1.87/share in the last quarter. The analysts projected EPS of $1.25/share depicting a Surprise of 49.6 Percent.
Taking a look at Earnings per Share, General Motors Company tends to be beating the analyst estimates more than Merck & Company, Inc.. so GM is more profitable than MRK.
Technical Analysis of Merck & Company, Inc. & General Motors Company
Moving average convergence divergence (MACD) shows that Merck & Company, Inc. (NYSE:MRK) is on a PRICE RELATIVITY trend While General Motors Company (NYSE:GM) is on PRICE RELATIVITY trend. The trend for the past 10-days shows that the Merck & Company, Inc. was in BULLISH territory and General Motors Company was in BULLISH territory.
MRK’s current statistics gauge that the stock candle is BEARISH with HIGH volatility. While GM’s candle is BEARISH with HIGH.
EPS Growth Rate: MRK’s 9.54% versus GM’s 8.55%
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 Merck & Company, Inc. (NYSE:MRK) is predicted at 9.54% while General Motors Company (NYSE:GM) stands at 8.55%. These numbers suggest that MRK 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 MRK stands at 1.3 while GM is at 0.9 whereas the debt ratio of the prior is 0.72 while the debt ratio of the later is 2.69.
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 1.8 for MRK and 2.3 for GM which means MRK has Buy rating whereas GM 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 MRK is $79.12 which is 8.66% of its current price while GM has price target of 44.55 which is 19.12% 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.
MRK currently has price to earning P/E ratio of 32.78 whereas GM has 6.12 while the forward P/E ratio for the prior stands at 15.35 and for the later it depicts the value of 6.24.
The price to Book P/B for MRK is 5.96, Price to Sale is at 4.66 and for GM these ratios stand at 1.34 and 0.35.