The shares of Petroleo Brasileiro S.A.- Petrobras (NYSE:PBR) and Microsoft Corporation (NASDAQ:MSFT) were among the active stocks of the last trading sessions. Petroleo Brasileiro S.A.- Petrobras (NYSE:PBR) declined to -3.92% closing at the price of $14.94 whereas the shares of Microsoft Corporation (NASDAQ:MSFT) declined -0.19% with the decrease of -0.21 points closing at the price of $111.75. Petroleo Brasileiro S.A.- Petrobras has currently decrease -7.34% in its stock over the period of 6-months while its rival Microsoft Corporation added 14.38% 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 Petroleo Brasileiro S.A.- Petrobras (NYSE:PBR) is 5.1% while the ROI of Microsoft Corporation (NASDAQ:MSFT) is 17.6%. Another figure that is to be considered while analyzing the profitability of a share is its EBITDA margin, PBR’s EBITDA Margin is 7.42 whereas MSFT’s is 17.41.
Both the profitability ratios suggest that Microsoft Corporation (NASDAQ:MSFT) is more suitable investment in terms of profitability and return.
EPS & Surprise Factor
Petroleo Brasileiro S.A.- Petrobras (NYSE:PBR) reported $0.26/share EPS for the previous quarter where analysts were predicting an EPS to be $0.4/share Thus lagging the analyst Estimates with a Surprise Factor of -35 Percent. While, Microsoft Corporation (NASDAQ:MSFT) reported EPS of $1.14/share in the last quarter. The analysts projected EPS of $0.96/share depicting a Surprise of 18.8 Percent.
Taking a look at Earnings per Share, Microsoft Corporation tends to be beating the analyst estimates more than Petroleo Brasileiro S.A.- Petrobras. so MSFT is more profitable than PBR.
Technical Analysis of Petroleo Brasileiro S.A.- Petrobras & Microsoft Corporation
Moving average convergence divergence (MACD) shows that Petroleo Brasileiro S.A.- Petrobras (NYSE:PBR) is on a PRICE RELATIVITY trend While Microsoft Corporation (NASDAQ:MSFT) is on PRICE RELATIVITY trend. The trend for the past 10-days shows that the Petroleo Brasileiro S.A.- Petrobras was in BEARISH territory and Microsoft Corporation was in BULLISH territory.
PBR’s current statistics gauge that the stock candle is BEARISH with MEDIUM volatility. While MSFT’s candle is BEARISH with HIGH.
EPS Growth Rate: PBR’s 24% versus MSFT’s 13.68%
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 Petroleo Brasileiro S.A.- Petrobras (NYSE:PBR) is predicted at 24% while Microsoft Corporation (NASDAQ:MSFT) stands at 13.68%. These numbers suggest that PBR 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 PBR stands at 1.7 while MSFT is at 2.9 whereas the debt ratio of the prior is 1.25 while the debt ratio of the later is 0.94.
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 2.5 for PBR and 1.7 for MSFT which means PBR has Hold rating whereas MSFT 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 PBR is $16.17 which is 7.61% of its current price while MSFT has price target of 125.15 which is 10.71% 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.
PBR currently has price to earning P/E ratio of 30.49 whereas MSFT has 26.66 while the forward P/E ratio for the prior stands at 7.09 and for the later it depicts the value of 22.19.
The price to Book P/B for PBR is 1.28, Price to Sale is at 1.13 and for MSFT these ratios stand at 9.98 and 7.45.