The shares of American Eagle Outfitters, Inc. (NYSE:AEO) and ADT Inc. (NYSE:ADT) were among the active stocks of the last trading sessions. American Eagle Outfitters, Inc. (NYSE:AEO) soared to 0.49% closing at the price of $22.57 whereas the shares of ADT Inc. (NYSE:ADT) declined -4.94% with the decrease of -0.38 points closing at the price of $7.32. American Eagle Outfitters, Inc. has currently increase 11.18% in its stock over the period of 6-months while its rival ADT Inc. subtracted -6.39% 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 American Eagle Outfitters, Inc. (NYSE:AEO) is 16% while the ROI of ADT Inc. (NYSE:ADT) is 7.1%. Another figure that is to be considered while analyzing the profitability of a share is its EBITDA margin, AEO’s EBITDA Margin is 6.64 whereas ADT’s is 7.01.
Both the profitability ratios suggest a mixed sentiment for American Eagle Outfitters, Inc. (NYSE:AEO) and ADT Inc. (NYSE:ADT).
EPS & Surprise Factor
American Eagle Outfitters, Inc. (NYSE:AEO) reported $0.34/share EPS for the previous quarter where analysts were predicting an EPS to be $0.31/share Thus beating the analyst Estimates with a Surprise Factor of 9.7 Percent. While, ADT Inc. (NYSE:ADT) reported EPS of $0.15/share in the last quarter. The analysts projected EPS of $0.11/share depicting a Surprise of 36.4 Percent.
Taking a look at Earnings per Share, ADT Inc. tends to be beating the analyst estimates more than American Eagle Outfitters, Inc.. so ADT is more profitable than AEO.
Technical Analysis of American Eagle Outfitters, Inc. & ADT Inc.
Moving average convergence divergence (MACD) shows that American Eagle Outfitters, Inc. (NYSE:AEO) is on a PRICE RELATIVITY trend While ADT Inc. (NYSE:ADT) is on PRICE RELATIVITY trend. The trend for the past 10-days shows that the American Eagle Outfitters, Inc. was in BEARISH territory and ADT Inc. was in BULLISH territory.
AEO’s current statistics gauge that the stock candle is BULLISH with HIGH volatility. While ADT’s candle is BEARISH with LOW.
EPS Growth Rate: AEO’s 13.09% versus ADT’s 16.15%
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 American Eagle Outfitters, Inc. (NYSE:AEO) is predicted at 13.09% while ADT Inc. (NYSE:ADT) stands at 16.15%. These numbers suggest that ADT 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 AEO stands at 2 while ADT is at 0.9 whereas the debt ratio of the prior is 0 while the debt ratio of the later is 2.05.
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 2.4 for AEO and 1.9 for ADT which means AEO has Hold rating whereas ADT 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 AEO is $25.67 which is 12.08% of its current price while ADT has price target of 13.31 which is 45% 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.
AEO currently has price to earning P/E ratio of 16.23 whereas ADT has 17.35 while the forward P/E ratio for the prior stands at 13.91 and for the later it depicts the value of 6.64.
The price to Book P/B for AEO is 3.17, Price to Sale is at 1 and for ADT these ratios stand at 1.18 and 1.24.