This article will cover financial analysis of five major companies like:
Humana Inc. (NYSE:HUM), Verizon Communications Inc. (NYSE:VZ), Teva Pharmaceutical Industries Limited (NASDAQ:TEVA), Intel Corporation (NASDAQ:INTC), and Oracle Corp. (NASDAQ:ORCL). A main emphasis will be to provide complete analysis on the company’s performance based on its financial statements; furthermore to provide recommendations of whether to buy or sell the stock.
Humana Inc. (HUM)
The stock of Humana Inc. is trading at around $73.29 with a change increase of 3.53%, whereas stock of the overall Health care Industry has increased by 1.84%. Furthermore, the stock of industry leaders: United health Group, Inc. (NYSE:UNH), Express Scripts Inc. (NASDAQ:ESRX) and WellPoint Inc. (WLP), are trading at $45.72 with a change increase of 1.40%, $45.39 with a change increase of 2.18%, and $60.43 with a change increase of 1.43% respectively. It can be noted that stock of HUM is leading the industry by beating the industry leaders in terms of highest trading stock price and highest percentage change increase overall.
The P/E ratio of HUM is 9.75, on the other hand the P/E ratio of its direct competitors Aetna Inc. (NYSE:AET) and CIGNA Corporation (NYSE:CI), are 8.33 and 7.63 correspondingly. In addition the P/E ratio of UNH, which is an industry leader, is 10.26. The P/E ratio suggests that market is expecting an increase in stock prices of HUM, compared to its direct competitors or same size companies. Consequently, this could be due to news, which says HUM plans to acquire Arcadian Management Services, a Medicare Advantage health maintenance organization.
As expected HUM has surpassed its direct competitors in generation of revenue, as quarterly revenue growth is around 8.10% for HUM, -2.40% for AET and 2.90% for CI in that order. However gross profit margin of HUM is 20.80%, compared to 28.86% for AET, and 43.27% for CI. This simply means that HUM has more direct costs against its competitors, but by looking at operating profit margins of 6.01% for Hum, 8.99% for AET, and 11.25% for CI; it can be argued that HUM has way less operating expenses compared to its competitors.
By looking at numbers and ratios for HUM, it looks like a good buy. The main reason is high P/E as market is expecting, and Hum is hoping to meet markets expectation by acquiring, Arcadian Management Services. Moreover HUM’s return on equity currently is around 18.14%, which is expected to increase in the near future.
Verizon Communications Inc. (VZ)
Currently the stock for Verizon Communications Inc. (VZ) is trading at $36.37 with a percentage increase of 0.69%; moreover the last 200 days moving average rate is around $36.51, and 52-Week High rate is $38.95. Therefore it can be assumed that stock for VZ is, and will be moving in between $35 to $38, with no such significant change. On the other hand, stock of Telecom Services industry leader AT&T, Inc. (NYSE:T) is trading at $29.68 with a change increase of 1.44%. However AT&T has the higher market capitalization of $175.88 billion compared to $103.03 billion for VZ, but VZ has the higher average stock rate and P/E ratio of 16.30, against 8.64 for T.
As, VZ is under process or considering some joint ventures with several companies like a venture with ‘Vodafone Group plc’ in wireless technology, with smart phone manufacturer ‘Research In Motion Ltd’, and many more. Hence the market’s future expectation regarding its earnings and returns to its shareholders are high, which is confirmed by the high P/E ratio compared to the overall industry.
Additionally the gross profit margin of VZ is 59.69% weigh up against 56.91% of T, where as operating profit margins are: 17.57% of VZ, and 15.51% of T. By looking at margins, VZ has outperformed T as it has less direct costs and operating costs/ expenses too.
Also, VZ is being able to produce returns to its shareholders at a rate of around 16.23%, while T at rate of 18.29%. It can be noted that VZ is making modest returns, but it is worth more for long-term investments due to facts that, the stock doesn’t vary drastically.
Teva Pharmaceutical Industries Limited (TEVA)
The stock of Teva Pharmaceutical Industries Limited (TEVA) is trading at around $40.53, with a change percentage decrease of 0.06%, where stocks of the overall drug manufacturers industry have increased by 0.53%. Moreover stock of industry leaders like: Novo Nordisk A/S. (NYSE:NVO) and Allergan Inc. (NYSE:AGN) are trading at $104.31 with a change increase of 0.67%, and $80.78 with a change increase of 1.48%. Also last 52-Week change shows decrease in stock prices by 19.13%; while last 52-Weeks Low and high rates were $36.05 and $57.08 in that order.
The significant decrease in prices by around 37% (from $57.08 to $36.05) can be noted, as the stock has varied drastically, and can fluctuate by the same amount in the future as well. Further, considering the decrease in stock during the last 52 weeks may weaken the position of TEVA, amongst its direct competitors and overall industry.
Furthermore the operating profit margin of TEVA is 24.93% judge against, 31.63% of NVO and 25.09% of AGN. Where as net profit margin are 18.62% for TEVA, 24.82% for NVO and -0.05% for AGN. By looking at margins TEVA has performed considerably well against a few companies within the industry. On the other side returns generated for its shareholders are at a rate of 14.71% for TEVA, 44.58% for NVO, and 0.04% for AGN; however TEVA has sensible earnings, but its returns to shareholders are noticeably very less in contrast with NVO especially.
By considering facts above TEVA is a good buy for short-term investments because it has able to generate modest returns, but its share prices are varying rapidly; therefore TEVA would not be a good choice for long-term investments in the stock.
Intel Corporation (INTC)
Intel is the largest manufacturer of integrated circuits for computing and communications industries worldwide, with a total market capitalization around $105.70 billion. However INTC’s direct competitor Advanced Micro Devices, Inc. (NYSE:AMD) has way less market share compared to INTC, as it has only market capitalization of $4.72 billion; therefore numbers comparison between these companies would not make much sense, but can be compared.
The stock of INTC is trading at $20.13 with percentage decrease of around 0.54%; similarly stock for AMD is at $6.83 with percentage decrease of 0.15%. Furthermore during last 52 weeks stock prices of INTC has changed by percentage increase of 10.97%. In addition 200 day moving average stock price is approximately $21.51. It can be noted that stock prices for INTC are constantly trading at around $20 with no significant decrease.
Moreover, dividend payout ratio is roughly 31% of net income, which means INTC is paying dividends to its shareholders by around 5% more than income generated against equity invested, as its return on equity is 25.91%. On the other hand return on equity for AMD is 69%, which simply means that the company has been able to generate higher returns for equity holders in AMD.
By looking at fact above INTC is a good buy for investors who are looking for both long and short term investments. The main reasons are as its stock prices are not changing rapidly; in addition its payout ratio to its equity holders is even more than its income generated against total equity holders.
Oracle Corp. (ORCL)
Oracle Corp. (ORCL), is an enterprise software company. Microsoft Corporation (NASDAQ:MSFT) and International Business Machines Corp. (NYSE:IBM) are regarded as competitors to ORCL whereas MSFT can be called an industry leader; thus metrics and numbers of both competitors will be used for comparison purpose, in order to get a clearer idea of performance of ORCL, in opposition to its main direct competitors.
Market capitalization of ORCL is around $136.62 billion, on the other hand MSFT has been able to capitalized $216.16 billion and IBM has $199.42 billion, out of total market. Despite of having lesser market share, ORCL has managed to earn net profit margin of around 24%, compared to IBM of 14.70% and MSFT of 33.10%. Furthermore return on equity for ORCL is 23.93%, but dividend payout ratio is only 13%.
While its competitors have generated returns on equity, at a rate of 44.84% for MSFT, and 69.26% for IBM; thus it can be noted that ORCL has more equity/shareholders than MSFT and IBM that’s why its returns to equity holders are less, by considering that ORCL has managed to earn higher net profit margin than IBM and at least around equal to MSFT.
Due to above facts, ORCL is not good buy for investors looking to invest, and good sell for investors already invested, because its returns generated for equity holders are way less than its main competitors.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.