Which Company’s Stock is more Profitable? Rowan Companies plc (RDC) or Ally Financial Inc. (ALLY)

The shares of Rowan Companies plc (NYSE:RDC) and Ally Financial Inc. (NYSE:ALLY) were among the active stocks of the last trading sessions. Rowan Companies plc (NYSE:RDC) declined to -5.34% closing at the price of $16.47 whereas the shares of Ally Financial Inc. (NYSE:ALLY) soared 0.34% with the increase of 0.09 points closing at the price of $26.29. Rowan Companies plc has currently increase 3.52% in its stock over the period of 6-months while its rival Ally Financial Inc. subtracted -1.31% 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 Rowan Companies plc (NYSE:RDC) is 2.7% while the ROI of Ally Financial Inc. (NYSE:ALLY) is 6.7%. Another figure that is to be considered while analyzing the profitability of a share is its EBITDA margin, RDC’s EBITDA Margin is 13.99 whereas ALLY’s is NOT AVAILABLE.

Both the profitability ratios suggest that Ally Financial Inc. (NYSE:ALLY) is more suitable investment in terms of profitability and return.

EPS & Surprise Factor

Rowan Companies plc (NYSE:RDC) reported $-1.13/share EPS for the previous quarter where analysts were predicting an EPS to be $-1.17/share Thus beating the analyst Estimates with a Surprise Factor of 3.4 Percent. While, Ally Financial Inc. (NYSE:ALLY) reported EPS of $0.91/share in the last quarter. The analysts projected EPS of $0.8/share depicting a Surprise of 13.7 Percent.

Taking a look at Earnings per Share, Ally Financial Inc. tends to be beating the analyst estimates more than Rowan Companies plc. so ALLY is more profitable than RDC.

Technical Analysis of Rowan Companies plc & Ally Financial Inc.

Moving average convergence divergence (MACD) shows that Rowan Companies plc (NYSE:RDC) is on a PRICE RELATIVITY trend While Ally Financial Inc. (NYSE:ALLY) is on PRICE RELATIVITY trend. The trend for the past 10-days shows that the Rowan Companies plc was in BULLISH territory and Ally Financial Inc. was in BULLISH territory.

RDC’s current statistics gauge that the stock candle is BEARISH with HIGH volatility. While ALLY’s candle is BULLISH with HIGH.

EPS Growth Rate: RDC’s -4.4% versus ALLY’s 5%

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 Rowan Companies plc (NYSE:RDC) is predicted at -4.4% while Ally Financial Inc. (NYSE:ALLY) stands at 5%. These numbers suggest that ALLY 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 RDC stands at 3 while ALLY is at 0 whereas the debt ratio of the prior is 0.49 while the debt ratio of the later is 3.48.

The values of the both ratios suggest that one is more liquid and other investment is more risk free.

Analyst Recommendations

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 2.5 for RDC and 1.9 for ALLY which means RDC has Hold rating whereas ALLY 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 RDC is $19.89 which is 17.19% of its current price while ALLY has price target of 33.25 which is 20.93% of its current price.

Valuation Ratios

Valuation is the process of determining the company’s worth for an investor, the valuation ratios give an insight to that worthiness.

RDC currently has price to earning P/E ratio of 0 whereas ALLY has 8.97 while the forward P/E ratio for the prior stands at 0 and for the later it depicts the value of 7.39.

The price to Book P/B for RDC is 0.41, Price to Sale is at 2.22 and for ALLY these ratios stand at 0.84 and 1.3.