Earnings

Comparing Opko Health, Inc. (OPK) and Juno Therapeutics, Inc. (JUNO)

Opko Health, Inc. (NASDAQ:OPK) shares are down more than -43.55% this year and recently increased 5.21% or $0.26 to settle at $5.25. Juno Therapeutics, Inc. (NASDAQ:JUNO), on the other hand, is up 189.76% year to date as of 11/29/2017. It currently trades at $54.62 and has returned -9.46% during the past week.

Opko Health, Inc. (NASDAQ:OPK) and Juno Therapeutics, Inc. (NASDAQ:JUNO) are the two most active stocks in the Biotechnology industry based on today’s trading volumes. We will compare the two companies based on the strength of various metrics, including growth, profitability, risk, return, and valuation to determine if one is a better investment than the other.

Growth

Companies that can increase earnings at a high compound rate over time are attractive to investors. Analysts expect OPK to grow earnings at a 12.00% annual rate over the next 5 years.



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 Return on Investment (ROI) to measure this. OPK’s ROI is -0.80% while JUNO has a ROI of -23.00%. The interpretation is that OPK’s business generates a higher return on investment than JUNO’s.

Cash Flow 




Cash is king when it comes to investing. OPK’s free cash flow (“FCF”) per share for the trailing twelve months was -0.09. Comparatively, JUNO’s free cash flow per share was -0.51. On a percent-of-sales basis, OPK’s free cash flow was -4.13% while JUNO converted -0.07% of its revenues into cash flow. This means that, for a given level of sales, JUNO is able to generate more free cash flow for investors.

Liquidity and Financial Risk

Liquidity and leverage ratios measure a company’s ability to meet short-term obligations and longer-term debts. OPK has a current ratio of 1.70 compared to 4.80 for JUNO. This means that JUNO can more easily cover its most immediate liabilities over the next twelve months. OPK’s debt-to-equity ratio is 0.07 versus a D/E of 0.03 for JUNO. OPK is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

OPK trades at a P/B of 1.41, and a P/S of 2.45, compared to a P/B of 5.02, and a P/S of 56.16 for JUNO. 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. OPK is currently priced at a -58.82% to its one-year price target of 12.75. Comparatively, JUNO is -1.66% relative to its price target of 55.54. This suggests that OPK 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 1.90 for JUNO, which implies that analysts are more bullish on the outlook for OPK.

Insider Activity and Investor Sentiment

Comparing the number of shares sold short to the float is a method analysts often use to get a reading on investor sentiment. OPK has a short ratio of 12.57 compared to a short interest of 3.26 for JUNO. This implies that the market is currently less bearish on the outlook for JUNO.

Summary

Juno Therapeutics, Inc. (NASDAQ:JUNO) beats Opko Health, Inc. (NASDAQ:OPK) on a total of 6 of the 14 factors compared between the two stocks. JUNO is growing fastly, higher liquidity and has lower financial risk. Finally, JUNO has better sentiment signals based on short interest.

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