(By Rich Bieglmeier) iStock likes it when we scan through the charts and see similar stocks show flashing parallel buy or sell signals. In Wall Street jargon, it is called confirmation.
In last night's search, we found two companies that fit into a small box, The GEO Group, Inc.
) and Corrections Corporation of America
). Both are found in the corrections facilities sub-industry. The best iStock can tell, there are less than five publicly traded prison stocks. As a group, it doesn't get much tighter than that.
GEO and CXW have recently been, uh hum, correcting and triggered a couple of buy signals on Tuesday. Both have been under pressure recently, falling from 2012 highs as the overall market stumbled.
Yesterday, the jailbirds traveled above their 50-day averages after falling below the key, technical benchmark. GEO has added a bullish MACD crossover and a broken multiple top to its list of reasons to buy on its chart.
CXW includes a MACD line moving into positive territory and its short-term moving averages beginning to cross in the right direction. Both have rising relative strength readings; although, Corrections might be hitting the upper limits of RSI, for now.
Let's see how the two stack up against each other fundamentally using a few of iStock's favorite metrics.
Analysts believe GEO will grow its earnings by 6.50% in 2013, while CXW is forecasted to increase by 6.40%. Advantage: None
The Geo Group has a forward P/E of 13.42% and CXW at 17.34 times 2013 eps projections: Advantage: GEO (The lower forward price to earnings multiple also gives GEO a slight PEG ratio advantage as the two companies essentially share the same anticipated growth rate.)
On a price to book (P/B), price to cash flow (P/CF), and price to sales basis (P/S), GEO's 0.81 P/S, 7.37 P/CF and 1.28 P/B are more attractive than CXW's 1.6, 10.06, and 1.93, respectively. Triple Advantage: GEO
For one of Warren Buffet's favorite measuring sticks, return on equity (ROE), Corrections Corp sports a 10.58% ROE and The GEO 7.23%. Advantage: CXW
Just two more and we are done, we promise, and we'll make it quick.
When measured by enterprise value/EBITDA, Corrections' score of 8.75 is slightly lower than GEO's 9.01. Slightest Advantage: CXW
Finally, CXW also boasts of a better debt/equity ratio of 0.79, versus The GEO's 1.26 reading: Advantage: CXW
The grand tally of financial valuation metrics and our more favorable view of its stock chart makes The GEO Group, Inc. (GEO) iStock's favorite correctional facilities stock.