The shares of VALE S.A. (NYSE:VALE) and Transocean Ltd. (NYSE:RIG) were among the active stocks of the last trading sessions. VALE S.A. (NYSE:VALE) declined to -0.98% closing at the price of $15.17 whereas the shares of Transocean Ltd. (NYSE:RIG) declined -8.38% with the decrease of -0.96 points closing at the price of $10.49. VALE S.A. has currently increase 6.5% in its stock over the period of 6-months while its rival Transocean Ltd. subtracted -19.43% 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 VALE S.A. (NYSE:VALE) is 13.7% while the ROI of Transocean Ltd. (NYSE:RIG) is -12.9%. Another figure that is to be considered while analyzing the profitability of a share is its EBITDA margin, VALE’s EBITDA Margin is 6.99.
Both the profitability ratios suggest a mixed sentiment for VALE S.A. (NYSE:VALE) and Transocean Ltd. (NYSE:RIG).
EPS & Surprise Factor
VALE S.A. (NYSE:VALE) reported $0.27/share EPS for the previous quarter where analysts were predicting an EPS to be $0.39/share Thus lagging the analyst Estimates with a Surprise Factor of -30.8 Percent. While, Transocean Ltd. (NYSE:RIG) reported EPS of $0.06/share in the last quarter. The analysts projected EPS of $-0.1/share depicting a Surprise of 160 Percent.
Taking a look at Earnings per Share, Transocean Ltd. tends to be beating the analyst estimates more than VALE S.A.. so RIG is more profitable than VALE.
Technical Analysis of VALE S.A. & Transocean Ltd.
Moving average convergence divergence (MACD) shows that VALE S.A. (NYSE:VALE) is on a PRICE RELATIVITY trend While Transocean Ltd. (NYSE:RIG) is on PRICE RELATIVITY trend. The trend for the past 10-days shows that the VALE S.A. was in BULLISH territory and Transocean Ltd. was in BULLISH territory.
VALE’s current statistics gauge that the stock candle is BEARISH with HIGH volatility. While RIG’s candle is BEARISH with HIGH.
EPS Growth Rate: VALE’s 17.74% versus RIG’s 0%
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 VALE S.A. (NYSE:VALE) is predicted at 17.74% while Transocean Ltd. (NYSE:RIG) stands at 0%. These numbers suggest that VALE 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 VALE stands at 1.7 while RIG is at 3.1 whereas the debt ratio of the prior is 0.41 while the debt ratio of the later is 0.78.
The values of the both ratios suggest that RIG 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 2.2 for VALE and 2.5 for RIG which means VALE has Hold rating whereas RIG 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 VALE is $17.11 which is 11.34% of its current price while RIG has price target of 14.5 which is 27.66% 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.
VALE currently has price to earning P/E ratio of 18.73 whereas RIG has 0 while the forward P/E ratio for the prior stands at 8.47 and for the later it depicts the value of 0.
The price to Book P/B for VALE is 1.78, Price to Sale is at 2.35 and for RIG these ratios stand at 0.41 and 1.69.