The shares of Rio Tinto Plc (NYSE:RIO) and The Travelers Companies, Inc. (NYSE:TRV) were among the active stocks of the last trading sessions. Rio Tinto Plc (NYSE:RIO) declined to -0.21% closing at the price of $52.1 whereas the shares of The Travelers Companies, Inc. (NYSE:TRV) soared 0.54% with the increase of 0.71 points closing at the price of $130.99. Rio Tinto Plc has currently decrease -9.22% in its stock over the period of 6-months while its rival The Travelers Companies, Inc. subtracted -0.2% 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 Rio Tinto Plc (NYSE:RIO) is 17.3% while the ROI of The Travelers Companies, Inc. (NYSE:TRV) is 8.4%. Another figure that is to be considered while analyzing the profitability of a share is its EBITDA margin, RIO’s EBITDA Margin is 5.9 whereas TRV’s is 8.17.
Both the profitability ratios suggest a mixed sentiment for Rio Tinto Plc (NYSE:RIO) and The Travelers Companies, Inc. (NYSE:TRV).
EPS & Surprise Factor
Technical Analysis of Rio Tinto Plc & The Travelers Companies, Inc.
Moving average convergence divergence (MACD) shows that Rio Tinto Plc (NYSE:RIO) is on a PRICE RELATIVITY trend While The Travelers Companies, Inc. (NYSE:TRV) is on PRICE RELATIVITY trend. The trend for the past 10-days shows that the Rio Tinto Plc was in BULLISH territory and The Travelers Companies, Inc. was in BULLISH territory.
RIO’s current statistics gauge that the stock candle is BEARISH with HIGH volatility. While TRV’s candle is BULLISH with HIGH.
EPS Growth Rate: RIO’s -6.2% versus TRV’s 19.81%
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 Rio Tinto Plc (NYSE:RIO) is predicted at -6.2% while The Travelers Companies, Inc. (NYSE:TRV) stands at 19.81%. These numbers suggest that TRV 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 RIO stands at 1.5 while TRV is at 0 whereas the debt ratio of the prior is 0.31 while the debt ratio of the later is 0.29.
The values of the both ratios suggest that RIO 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 1.7 for RIO and 2.7 for TRV which means RIO has Buy rating whereas TRV 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 RIO is $61.49 which is 15.27% of its current price while TRV has price target of 137 which is 4.39% 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.
RIO currently has price to earning P/E ratio of 8.99 whereas TRV has 13.91 while the forward P/E ratio for the prior stands at 10.84 and for the later it depicts the value of 11.57.
The price to Book P/B for RIO is 2.14, Price to Sale is at 2.21 and for TRV these ratios stand at 1.55 and 1.16.