ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) shares are down more than -0.31% this year and recently increased 1.59% or $0.45 to settle at $28.75. Athenex, Inc. (NASDAQ:ATNX), on the other hand, is up 34.39% year to date as of 12/21/2017. It currently trades at $16.88 and has returned 0.30% during the past week.
ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) and Athenex, Inc. (NASDAQ:ATNX) are the two most active stocks in the Biotechnology industry based on today’s trading volumes. Investors are clearly interested in the two names, but is one a better choice than the other? We will compare the two companies across growth, profitability, risk, valuation, and insider trends to answer this question.
One of the key things investors look for in a company is the ability to grow earnings at a high compound rate over time. Analysts expect ACAD to grow earnings at a 38.30% annual rate over the next 5 years. Comparatively, ATNX is expected to grow at a -10.86% annual rate. All else equal, ACAD’s higher growth rate would imply a greater potential for capital appreciation.
Profitability and Returns
Growth isn’t very attractive to investors if companies are sacrificing profitability and shareholder returns to achieve that growth. We will use Return on Investment (ROI), which control for differences in capital structure between the two companies, to measure profitability and return. ACAD’s ROI is -52.90% while ATNX has a ROI of -128.00%. The interpretation is that ACAD’s business generates a higher return on investment than ATNX’s.
The amount of free cash flow available to investors is ultimately what determines the value of a stock. ACAD’s free cash flow (“FCF”) per share for the trailing twelve months was -0.48. Comparatively, ATNX’s free cash flow per share was -0.28.
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. ACAD has a current ratio of 11.10 compared to 3.10 for ATNX. This means that ACAD can more easily cover its most immediate liabilities over the next twelve months. ACAD’s debt-to-equity ratio is 0.00 versus a D/E of 0.02 for ATNX. ATNX is therefore the more solvent of the two companies, and has lower financial risk.
ACAD trades at a P/B of 9.33, and a P/S of 37.70, compared to a P/B of 8.44, and a P/S of 34.60 for ATNX. 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
Investors often compare a stock’s current price to an analyst price target to get a sense of the potential upside within the next year. ACAD is currently priced at a -42.25% to its one-year price target of 49.78. Comparatively, ATNX is -35.67% relative to its price target of 26.24. This suggests that ACAD 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 ACAD and 2.20 for ATNX, which implies that analysts are more bullish on the outlook for ATNX.
Insider Activity and Investor Sentiment
Short interest, or the percentage of a stock’s tradable shares currently being shorted, is another metric investors use to get a pulse on sentiment.ACAD has a short ratio of 6.08 compared to a short interest of 10.04 for ATNX. This implies that the market is currently less bearish on the outlook for ACAD.
ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) beats Athenex, Inc. (NASDAQ:ATNX) on a total of 7 of the 13 factors compared between the two stocks. ACAD is growing fastly, generates a higher return on investment, higher liquidity and has lower financial risk. ACAD is more undervalued relative to its price target. Finally, ACAD has better sentiment signals based on short interest.