In my last post I did a qualitative comparison between Sinopec and CNOOC, so I thought it's time to put my money where my mouth is, or rather, put my money on the numbers. Let's see whether a quick quantitative comparison will prove me right or wrong. (If you just want a summary, skip to the bottom.)
Using Technical Analysis
So I plotted a graph of both Sinopec Shanghai Petrochemical Co. (NYSE:SHI) and CNOOC Limited (NYSE:CEO) and compared the two using some upper indicators (okay, for those of you keeping score at home, I cheated a little bit and used ADR prices instead of H-share prices, generally because data on NYSE is better, but the explanation still goes). Let's see:
SHI: started the year at a low of $50.02, closed on Friday at $83.50, a +66.93% return.
CEO: started the year at $93.00, closed on Friday at $178.05, a +91.45% return.
Don't need to mention the S&P 500, but CEO is definitely winning out so far in this race.
Obviously, the continued interest in the Chinese markets, particularly in oil, has boosted prices up and increased volatility. Let's further see the two stocks in recent trading action:
SHI and CEO: both closed on Friday above the trigger point on the parabolic SAR, suggesting a bullish trend. The Significant Point (point of reversal into a bearish trend) is $76.41 (-8.49%) and $149.68 (-15.93%), respectively. This means that a larger fall in CEO is required for a bearish trend than SHI.
(CEO better, with a clearer bullish trend.)
SHI: Closed above its 13 day moving average on Wednesday, a suggestive bullish trend, although it is also trading near its upper price channel band, so its price is high relative to the action for the past 5 days. The Bollinger Bands, however, show that SHI is trading relatively to reccent action.
CEO: Also closed above its 13 day moving average, but on Monday instead of Wednesday, suggesting a slightly earlier bullish trend. Its trading near the upper bounds of both Bollinger Bands and price channels bands, meaning its prices are very high recently.
(SHI slightly better, more stable prices, but both growing rapidly.)
Using Fundamentals
P/E: both are trading lower than the industry average, but SHI lower at 16.66 (vs. 17.90), meaning both are buyable.
Price to Book: SHI lower at 2.11, CEO above industry average at 4.79, meaning investors priced in more of CEO's assets than SHI.
Price to Cash Flow: SHI lower at 9.93, while CEO is very high at 15.17, suggesting that CEO's cash flow (pseudo-proxy for net income) is coming short compared to its trading action
Beta: CEO is more price-stable at 0.54 than SHI at 1.81, higher beta than industry average.
(SHI has more undervalued assets at the moment.)
Sales (5 year growth rate): CEO's growth is at +33.70%, leading the industry, while SHI's growth rate lacks the industry at +20.54%.
Earnings per share (5 year growth rate): CEO's EPS growth, at +30.41%, is also higher than that of SHI's, at +23.15%, but both lag the industry by more than 10%.
But note: CEO's sales and EPS for the most current quarter compared to the same quarter previous year has negative growth, whereas SHI has amazing positive growth in its most recent quarter.
(CEO's growth appears to be slowing down, SHI wins in recent growth.)
EBIDA (5 year average): shameful results for SHI (only 1/4x of industry average), while CEO beats the industry at a margin of 56.30%.
Net Profit (5 year average): again, SHI is only 1/3x of industry average, whereas CEO has a margin of 33.15, 2x industry average.
(CEO wins; SHI loses out on loss of current profitability)
Return on Equity (5 year average): CEO almost has a 2x industry average, at 27.40, whereas SHI lags the industry average at 13.51.
Return on Assets (5 year average): CEO beat industry average and has an ROA of 3x industry, while SHI only scrapes the industry average.
(CEO wins once again, managing more effectively and giving its investors more "bang for the buck" than SHI.)
The Final Word(s), Conclusion And Showdown Between CNOOC and Sinopec
1. CEO has a more transparent bullish trend than SHI, but SHI prices are relatively stable over the long run. Both are growing rapidly.
2. SHI's assets are relatively more undervalued than that of CEO's.
3. SHI has greater growth momentum than CEO, meaning greater potential in upward stock prices.
4. CEO has better current profitability and higher return for its investors than SHI, maybe subject to greater investment (institution or not) in the future.
Meaning that CEO is a good buy now, and SHI for future investment.
This conclusion, somewhat different to what I concluded in my last post (that CEO has stronger momentum than SHI) is subject to your interpretation. I still think that qualitative research has its merits, but earnings never lie, right?
(FYI: I own H-shares in both companies. Just a disclosure.)
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