The shares of Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) and Royal Dutch Shell PLC (NYSE:RDS-B) were among the active stocks of the last trading sessions. Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) declined to -9.55% closing at the price of $12.78 whereas the shares of Royal Dutch Shell PLC (NYSE:RDS-B) soared 0.23% with the increase of 0.15 points closing at the price of $65.71. Ironwood Pharmaceuticals, Inc. has currently decrease -27.18% in its stock over the period of 6-months while its rival Royal Dutch Shell PLC subtracted -12.02% 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 Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) is -19.4% while the ROI of Royal Dutch Shell PLC (NYSE:RDS-B) is 0%. Another figure that is to be considered while analyzing the profitability of a share is its EBITDA margin, IRWD’s EBITDA Margin is -32.19 whereas RDS-B’s is 6.7.
Both the profitability ratios suggest that Royal Dutch Shell PLC (NYSE:RDS-B) is more suitable investment in terms of profitability and return.
EPS & Surprise Factor
Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) reported $-0.38/share EPS for the previous quarter where analysts were predicting an EPS to be $-0.17/share Thus lagging the analyst Estimates with a Surprise Factor of -123.5 Percent. While, Royal Dutch Shell PLC (NYSE:RDS-B) reported EPS of $0.67/share in the last quarter. The analysts projected EPS of $1.38/share depicting a Surprise of -51.4 Percent.
Taking a look at Earnings per Share, Royal Dutch Shell PLC tends to be beating the analyst estimates more than Ironwood Pharmaceuticals, Inc.. so RDS-B is more profitable than IRWD.
EPS Growth Rate: IRWD’s 0% versus RDS-B’s -7.1%
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 Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) is predicted at 0% while Royal Dutch Shell PLC (NYSE:RDS-B) stands at -7.1%. These numbers suggest that IRWD 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 IRWD stands at 2.9 while RDS-B is at 0 whereas the debt ratio of the prior is 0 while the debt ratio of the later is 0.
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 2.7 for IRWD and 1.3 for RDS-B which means IRWD has Hold rating whereas RDS-B 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 IRWD is $19.18 which is 33.37% of its current price while RDS-B has price target of 86.33 which is 23.89% 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.
IRWD currently has price to earning P/E ratio of 0 whereas RDS-B has 13.93 while the forward P/E ratio for the prior stands at 64.87 and for the later it depicts the value of 10.3.
The price to Book P/B for IRWD is 0, Price to Sale is at 5.67 and for RDS-B these ratios stand at 1.38 and 0.76.