The shares of Microsoft Corporation (NASDAQ:MSFT) and Ford Motor Company (NYSE:F) were among the active stocks of the last trading sessions. Microsoft Corporation (NASDAQ:MSFT) soared to 3.94% closing at the price of $111.96 whereas the shares of Ford Motor Company (NYSE:F) soared 0.63% with the increase of 0.06 points closing at the price of $9.6. Microsoft Corporation has currently increase 14.35% in its stock over the period of 6-months while its rival Ford Motor Company subtracted -14.36% 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 Microsoft Corporation (NASDAQ:MSFT) is 17.6% while the ROI of Ford Motor Company (NYSE:F) is 2%. Another figure that is to be considered while analyzing the profitability of a share is its EBITDA margin, MSFT’s EBITDA Margin is 17.41 whereas F’s is 11.71.
Both the profitability ratios suggest that Microsoft Corporation (NASDAQ:MSFT) is more suitable investment in terms of profitability and return.
EPS & Surprise Factor
Microsoft Corporation (NASDAQ:MSFT) reported $1.14/share EPS for the previous quarter where analysts were predicting an EPS to be $0.96/share Thus beating the analyst Estimates with a Surprise Factor of 18.8 Percent. While, Ford Motor Company (NYSE:F) reported EPS of $0.29/share in the last quarter. The analysts projected EPS of $0.28/share depicting a Surprise of 3.6 Percent.
Taking a look at Earnings per Share, Microsoft Corporation tends to be beating the analyst estimates more than Ford Motor Company. so MSFT is more profitable than F.
Technical Analysis of Microsoft Corporation & Ford Motor Company
Moving average convergence divergence (MACD) shows that Microsoft Corporation (NASDAQ:MSFT) is on a PRICE RELATIVITY trend While Ford Motor Company (NYSE:F) is on PRICE RELATIVITY trend. The trend for the past 10-days shows that the Microsoft Corporation was in BULLISH territory and Ford Motor Company was in BULLISH territory.
MSFT’s current statistics gauge that the stock candle is BULLISH with HIGH volatility. While F’s candle is BEARISH with LOW.
EPS Growth Rate: MSFT’s 13.68% versus F’s 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 Microsoft Corporation (NASDAQ:MSFT) is predicted at 13.68% while Ford Motor Company (NYSE:F) stands at 15%. These numbers suggest that F 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 MSFT stands at 2.9 while F is at 1.2 whereas the debt ratio of the prior is 0.94 while the debt ratio of the later is 4.19.
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 1.7 for MSFT and 2.9 for F which means MSFT has Buy rating whereas F 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 MSFT is $125.15 which is 10.54% of its current price while F has price target of 9.89 which is 2.93% 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.
MSFT currently has price to earning P/E ratio of 26.71 whereas F has 6.62 while the forward P/E ratio for the prior stands at 22.24 and for the later it depicts the value of 7.29.
The price to Book P/B for MSFT is 10, Price to Sale is at 7.46 and for F these ratios stand at 1.04 and 0.24.