The shares of Lennar Corporation (NYSE:LEN) and McDermott International, Inc. (NYSE:MDR) were among the active stocks of the last trading sessions. Lennar Corporation (NYSE:LEN) declined to -2.49% closing at the price of $41.9 whereas the shares of McDermott International, Inc. (NYSE:MDR) declined -6.41% with the decrease of -0.66 points closing at the price of $9.63. Lennar Corporation has currently decrease -22.82% in its stock over the period of 6-months while its rival McDermott International, Inc. subtracted -56.25% 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 Lennar Corporation (NYSE:LEN) is 4.9% while the ROI of McDermott International, Inc. (NYSE:MDR) is 14.9%. Another figure that is to be considered while analyzing the profitability of a share is its EBITDA margin, LEN’s EBITDA Margin is 13.03 whereas MDR’s is 9.13.
Both the profitability ratios suggest a mixed sentiment for Lennar Corporation (NYSE:LEN) and McDermott International, Inc. (NYSE:MDR).
EPS & Surprise Factor
Lennar Corporation (NYSE:LEN) reported $1.37/share EPS for the previous quarter where analysts were predicting an EPS to be $1.21/share Thus beating the analyst Estimates with a Surprise Factor of 13.2 Percent. While, McDermott International, Inc. (NYSE:MDR) reported EPS of $0.2/share in the last quarter. The analysts projected EPS of $0.29/share depicting a Surprise of -31 Percent.
Taking a look at Earnings per Share, Lennar Corporation tends to be beating the analyst estimates more than McDermott International, Inc.. so LEN is more profitable than MDR.
Technical Analysis of Lennar Corporation & McDermott International, Inc.
Moving average convergence divergence (MACD) shows that Lennar Corporation (NYSE:LEN) is on a PRICE RELATIVITY trend While McDermott International, Inc. (NYSE:MDR) is on PRICE RELATIVITY trend. The trend for the past 10-days shows that the Lennar Corporation was in BULLISH territory and McDermott International, Inc. was in BEARISH territory.
LEN’s current statistics gauge that the stock candle is BULLISH with HIGH volatility. While MDR’s candle is BEARISH with HIGH.
EPS Growth Rate: LEN’s 21.8% versus MDR’s 65.74%
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 Lennar Corporation (NYSE:LEN) is predicted at 21.8% while McDermott International, Inc. (NYSE:MDR) stands at 65.74%. These numbers suggest that MDR 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 LEN stands at 0 while MDR is at 0.8 whereas the debt ratio of the prior is 0.76 while the debt ratio of the later is 0.99.
The values of the both ratios suggest that MDR 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 1.8 for LEN and 2.5 for MDR which means LEN has Buy rating whereas MDR 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 LEN is $60.25 which is 30.46% of its current price while MDR has price target of 21.76 which is 55.74% 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.
LEN currently has price to earning P/E ratio of 9.94 whereas MDR has 5.15 while the forward P/E ratio for the prior stands at 6.31 and for the later it depicts the value of 5.25.
The price to Book P/B for LEN is 0.98, Price to Sale is at 0.77 and for MDR these ratios stand at 0.49 and 0.33.