Stocks pairs trading: UAL vs CLX
Let's examine the trade potential for United Airlines Holdings, Inc. (UAL) and The Clorox Company (CLX) by analyzing their key financial metrics and recent performance to determine reasons for going long on UAL and short on CLX.
Price-to-Earnings (P/E) Ratio:
UAL: P/E ratio of 6.64
CLX: P/E ratio of 68.48
UAL's significantly lower P/E ratio indicates it is trading at a cheaper valuation relative to its earnings compared to CLX. This suggests that UAL is undervalued and has more room for price appreciation.
Forward P/E Ratio:
UAL: Forward P/E of 4.52
CLX: Forward P/E of 20.36
UAL's forward P/E is substantially lower than CLX’s, reinforcing the idea that UAL might be more attractively valued based on future earnings expectations.
Earnings Growth:
UAL: EPS next Y of 17.80%
CLX: EPS next Y of 9.53%
UAL’s expected earnings growth for next year is significantly higher than that of CLX, indicating stronger future performance potential.
Debt and Liquidity:
UAL: Debt/Eq of 3.79
CLX: Debt/Eq of 33.19
While both companies have high debt levels, CLX’s debt-to-equity ratio is exceedingly high compared to UAL, raising concerns about its financial stability and ability to manage debt.
Dividend and Analyst Outlook:
UAL: No current dividend but strong growth potential
CLX: Dividend yield of 3.63% but payout ratio of 395.03%
CLX's high dividend payout ratio suggests that it is paying out more in dividends than it earns, which may not be sustainable in the long run.
Performance Metrics:
UAL: Perf Quarter of 21.87%, Perf YTD of 30.38%
CLX: Perf Quarter of -12.33%, Perf YTD of -7.20%
UAL's recent performance metrics show strong positive growth, while CLX has experienced declines over the same periods, indicating potential momentum in favor of UAL.
Decision:
Long on 3 UAL: Due to its attractive valuation, strong earnings growth prospects, effective use of equity, and positive recent performance.
Short on 1 CLX: Due to its high valuation, lower earnings growth prospects, high debt levels, and declining recent performance.
Price-to-Earnings (P/E) Ratio:
UAL: P/E ratio of 6.64
CLX: P/E ratio of 68.48
UAL's significantly lower P/E ratio indicates it is trading at a cheaper valuation relative to its earnings compared to CLX. This suggests that UAL is undervalued and has more room for price appreciation.
Forward P/E Ratio:
UAL: Forward P/E of 4.52
CLX: Forward P/E of 20.36
UAL's forward P/E is substantially lower than CLX’s, reinforcing the idea that UAL might be more attractively valued based on future earnings expectations.
Earnings Growth:
UAL: EPS next Y of 17.80%
CLX: EPS next Y of 9.53%
UAL’s expected earnings growth for next year is significantly higher than that of CLX, indicating stronger future performance potential.
Debt and Liquidity:
UAL: Debt/Eq of 3.79
CLX: Debt/Eq of 33.19
While both companies have high debt levels, CLX’s debt-to-equity ratio is exceedingly high compared to UAL, raising concerns about its financial stability and ability to manage debt.
Dividend and Analyst Outlook:
UAL: No current dividend but strong growth potential
CLX: Dividend yield of 3.63% but payout ratio of 395.03%
CLX's high dividend payout ratio suggests that it is paying out more in dividends than it earns, which may not be sustainable in the long run.
Performance Metrics:
UAL: Perf Quarter of 21.87%, Perf YTD of 30.38%
CLX: Perf Quarter of -12.33%, Perf YTD of -7.20%
UAL's recent performance metrics show strong positive growth, while CLX has experienced declines over the same periods, indicating potential momentum in favor of UAL.
Decision:
Long on 3 UAL: Due to its attractive valuation, strong earnings growth prospects, effective use of equity, and positive recent performance.
Short on 1 CLX: Due to its high valuation, lower earnings growth prospects, high debt levels, and declining recent performance.
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