Opko Health, Inc. (NASDAQ:OPK) shares are down more than -25.16% this year and recently increased 3.11% or $0.21 to settle at $6.96. Repros Therapeutics Inc. (NASDAQ:RPRX), on the other hand, is down -57.28% year to date as of 10/20/2017. It currently trades at $0.56 and has returned -2.71% during the past week.
Opko Health, Inc. (NASDAQ:OPK) and Repros Therapeutics Inc. (NASDAQ:RPRX) are the two most active stocks in the Biotechnology industry based on today’s trading volumes. To determine if one is a better investment than the other, we will compare the two companies’ growth, profitability, risk, return, and valuation characteristics, as well as their analyst ratings and sentiment signals.
The ability to grow earnings at a compound rate over time is a crucial determinant of investment value. Analysts expect OPK to grow earnings at a 12.00% annual rate over the next 5 years. Comparatively, RPRX is expected to grow at a 27.90% annual rate. All else equal, RPRX’s higher growth rate would imply a greater potential for capital appreciation.
The amount of free cash flow available to investors is ultimately what determines the value of a stock. OPK’s free cash flow (“FCF”) per share for the trailing twelve months was -0.05. Comparatively, RPRX’s free cash flow per share was -0.07. On a percent-of-sales basis, OPK’s free cash flow was -2.29% while RPRX converted -5.26% of its revenues into cash flow. This means that, for a given level of sales, OPK is able to generate more free cash flow for investors.
Liquidity and Financial Risk
Analysts look at liquidity and leverage ratios to assess how easily a company can cover its liabilities. OPK has a current ratio of 1.70 compared to 1.80 for RPRX. This means that RPRX can more easily cover its most immediate liabilities over the next twelve months.
OPK trades at a P/B of 1.85, and a P/S of 3.19, compared to for RPRX. 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
A cheap stock is not necessarily a value stock. Most of the time, a stock is cheap for good reason. A stock only has value if the current price is substantially below the price at which it should trade in the future. OPK is currently priced at a -47.47% to its one-year price target of 13.25. Comparatively, RPRX is -89.82% relative to its price target of 5.50. This suggests that RPRX 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 OPK and 2.00 for RPRX, which implies that analysts are equally bullish on their outlook for the two stocks.
Risk and Volatility
Beta is an important measure that gives investors a sense of the market risk associated with a particular stock. A beta above 1 signals above average market risk, while a beta below 1 implies below average volatility. OPK has a beta of 1.92 and RPRX’s beta is 0.43. RPRX’s shares are therefore the less volatile of the two stocks.
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. OPK has a short ratio of 15.92 compared to a short interest of 0.58 for RPRX. This implies that the market is currently less bearish on the outlook for RPRX.
Repros Therapeutics Inc. (NASDAQ:RPRX) beats Opko Health, Inc. (NASDAQ:OPK) on a total of 9 of the 14 factors compared between the two stocks. RPRX has higher cash flow per share, generates a higher return on investment, higher liquidity and has lower financial risk. In terms of valuation, RPRX is the cheaper of the two stocks on book value and sales basis, RPRX is more undervalued relative to its price target. Finally, RPRX has better sentiment signals based on short interest.