Northwest Biotherapeutics, Inc. (NASDAQ:NWBO) and Dynavax Technologies Corporation (NASDAQ:DVAX) are the two most active stocks in the Biotechnology industry based on today’s trading volumes. The market is clearly enthusiastic about both these stocks, but which is the better investment? To answer this, we will compare the two companies based on the strength of their growth, profitability, risk, returns, valuation, analyst recommendations, and insider trends.
Profitability and Returns
A high growth rate isn’t necessarily valuable to investors. In fact, companies that overinvest in low return projects just to achieve a high growth rate can actually destroy shareholder value. Profitability and returns are a measure of the quality of a company’s business and its growth opportunities. We’ll use EBITDA margin and Return on Investment (ROI) to measure this. Northwest Biotherapeutics, Inc. (NWBO) has an EBITDA margin , compared to an EBITDA margin for Dynavax Technologies Corporation (DVAX). This suggests that equal underlying business is more profitable.
Cash is king when it comes to investing. NWBO’s free cash flow (“FCF”) per share for the trailing twelve months was -0.02. Comparatively, DVAX’s free cash flow per share was -0.35. On a percent-of-sales basis, NWBO’s free cash flow was -0.96% while DVAX converted -0.19% of its revenues into cash flow. This means that, for a given level of sales, DVAX is able to generate more free cash flow for investors.
Liquidity and Financial Risk
Liquidity and leverage ratios provide insight into the financial health of a company, and allow investors to determine the likelihood that the company will be able to continue operating as a going concern. NWBO has a current ratio compared to 11.90 for DVAX.
NWBO trades at a forward P/E , a P/B , and a P/S of 85.01, compared to a forward P/E , a P/B of 7.60, and a P/S of 164.88 for DVAX. NWBO is the cheaper of the two stocks on sales basis but is expensive in terms of P/E and P/B ratio. Given that earnings are what matter most to investors, analysts tend to place a greater weight on the P/E.
Analyst Price Targets and Opinions
Just because a stock is cheaper doesn’t mean there’s more value to be had. In order to assess value we need to compare the current price to where it’s likely to trade in the future. NWBO is currently priced at a -96.4% to its one-year price target of $5.00. Comparatively, DVAX is -13.13% relative to its price target of $24.75. This suggests that NWBO is the better investment over the next year.
The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 2.00 for NWBO and 1.80 for DVAX, which implies that analysts are more bullish on the outlook for NWBO.
Risk and Volatility
To gauge the market risk of a particular stock, investors use beta. Stocks with a beta above 1 are more volatile than the market as a whole. Conversely, a beta below 1 implies below average systematic risk. NWBO has a beta and DVAX’s beta is 1.50.
Insider Activity and Investor Sentiment
Short interest is another tool that analysts use to gauge investor sentiment. It represents the percentage of a stock’s tradable shares that are being shorted. NWBO has a short ratio of 7.24 compared to a short interest of 2.98 for DVAX. This implies that the market is currently less bearish on the outlook for DVAX.
Dynavax Technologies Corporation (NASDAQ:DVAX) beats Northwest Biotherapeutics, Inc. (NASDAQ:NWBO) on a total of 3 of the 7 factors compared between the two stocks. DVAX has higher cash flow per share. Finally, DVAX has better sentiment signals based on short interest.