OpGen, Inc. (NASDAQ:OPGN) shares are down more than -71.74% this year and recently decreased -2.69% or -$0.01 to settle at $0.32. Organovo Holdings, Inc. (NASDAQ:ONVO), on the other hand, is down -55.16% year to date as of 10/25/2017. It currently trades at $1.52 and has returned 2.70% during the past week.
OpGen, Inc. (NASDAQ:OPGN) and Organovo Holdings, Inc. (NASDAQ:ONVO) are the two most active stocks in the Medical Laboratories & Research 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.
Profitability and Returns
Just, if not more, important than the growth rate is the quality of that growth. Growth can actual be harmful to investors if it comes at the cost of weak profitability and low returns. To adjust for differences in capital structure we’ll use Return on Investment (ROI) as measures of profitability and return. OPGN’s ROI is -422.40% while ONVO has a ROI of -61.90%. The interpretation is that ONVO’s business generates a higher return on investment than OPGN’s.
Earnings don’t always accurately reflect the amount of cash that a company brings in. OPGN’s free cash flow (“FCF”) per share for the trailing twelve months was -0.12. Comparatively, ONVO’s free cash flow per share was -0.10. On a percent-of-sales basis, OPGN’s free cash flow was -0.15% while ONVO converted -0.25% of its revenues into cash flow. This means that, for a given level of sales, OPGN is able to generate more free cash flow for investors.
Liquidity and Financial Risk
Balance sheet risk is one of the biggest factors to consider before investing. OPGN has a current ratio of 0.60 compared to 15.70 for ONVO. This means that ONVO can more easily cover its most immediate liabilities over the next twelve months. OPGN’s debt-to-equity ratio is 2.17 versus a D/E of 0.00 for ONVO. OPGN is therefore the more solvent of the two companies, and has lower financial risk.
OPGN trades at a P/B of 16.25, and a P/S of 5.26, compared to a P/B of 2.76, and a P/S of 37.01 for ONVO. OPGN 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. OPGN is currently priced at a -78.67% to its one-year price target of 1.50. Comparatively, ONVO is -67.45% relative to its price target of 4.67. This suggests that OPGN 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 OPGN and 1.30 for ONVO, which implies that analysts are more bullish on the outlook for OPGN.
Insider Activity and Investor Sentiment
The analysis of insider buying and selling trends can be extended to the aggregate level. Short interest, which represents the percentage of a stock’s tradable shares currently being shorted, captures what the market as a whole feels about a stock. OPGN has a short ratio of 2.12 compared to a short interest of 13.01 for ONVO. This implies that the market is currently less bearish on the outlook for OPGN.
Organovo Holdings, Inc. (NASDAQ:ONVO) beats OpGen, Inc. (NASDAQ:OPGN) on a total of 6 of the 14 factors compared between the two stocks. ONVO has a higher cash conversion rate, has higher cash flow per share, higher liquidity and has lower financial risk. Finally, BAX has better sentiment signals based on short interest.