The shares of Royal Dutch Shell PLC (NYSE:RDS-A) and Archer-Daniels-Midland Company (NYSE:ADM) were among the active stocks of the last trading sessions. Royal Dutch Shell PLC (NYSE:RDS-A) declined to -2.11% closing at the price of $62.77 whereas the shares of Archer-Daniels-Midland Company (NYSE:ADM) soared 0.56% with the increase of 0.27 points closing at the price of $48.57. Royal Dutch Shell PLC has currently decrease -12.81% in its stock over the period of 6-months while its rival Archer-Daniels-Midland Company added 10.44% 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 Royal Dutch Shell PLC (NYSE:RDS-A) is 4.3% while the ROI of Archer-Daniels-Midland Company (NYSE:ADM) is 4.2%. Another figure that is to be considered while analyzing the profitability of a share is its EBITDA margin, RDS-A’s EBITDA Margin is 6.51 whereas ADM’s is 12.55.
Both the profitability ratios suggest a mixed sentiment for Royal Dutch Shell PLC (NYSE:RDS-A) and Archer-Daniels-Midland Company (NYSE:ADM).
EPS & Surprise Factor
Royal Dutch Shell PLC (NYSE:RDS-A) reported $1.34/share EPS for the previous quarter where analysts were predicting an EPS to be $1.5/share Thus lagging the analyst Estimates with a Surprise Factor of -10.7 Percent. While, Archer-Daniels-Midland Company (NYSE:ADM) reported EPS of $0.92/share in the last quarter. The analysts projected EPS of $0.83/share depicting a Surprise of 10.8 Percent.
Taking a look at Earnings per Share, Archer-Daniels-Midland Company tends to be beating the analyst estimates more than Royal Dutch Shell PLC. so ADM is more profitable than RDS-A.
EPS Growth Rate: RDS-A’s 7% versus ADM’s -8.8%
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 Royal Dutch Shell PLC (NYSE:RDS-A) is predicted at 7% while Archer-Daniels-Midland Company (NYSE:ADM) stands at -8.8%. These numbers suggest that RDS-A 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 RDS-A stands at 1.2 while ADM is at 1.6 whereas the debt ratio of the prior is 0.4 while the debt ratio of the later is 0.41.
The values of the both ratios suggest that ADM 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 RDS-A and 2.2 for ADM which means RDS-A has Buy rating whereas ADM 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 RDS-A is $83.67 which is 24.98% of its current price while ADM has price target of 53.18 which is 8.67% 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.
RDS-A currently has price to earning P/E ratio of 11.14 whereas ADM has 16.16 while the forward P/E ratio for the prior stands at 9.3 and for the later it depicts the value of 13.39.
The price to Book P/B for RDS-A is 1.32, Price to Sale is at 0.71 and for ADM these ratios stand at 1.46 and 0.43.