Lipocine Inc. (NASDAQ:LPCN) shares are down more than -45.64% this year and recently decreased -45.95% or -$1.59 to settle at $1.87. Galectin Therapeutics, Inc. (NASDAQ:GALT), on the other hand, is up 64.67% year to date as of 01/10/2018. It currently trades at $5.50 and has returned 29.11% during the past week.
Lipocine Inc. (NASDAQ:LPCN) and Galectin Therapeutics, Inc. (NASDAQ:GALT) are the two most active stocks in the Drugs – Generic 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.
The amount of free cash flow available to investors is ultimately what determines the value of a stock. LPCN’s free cash flow (“FCF”) per share for the trailing twelve months was -0.22. Comparatively, GALT’s free cash flow per share was -0.09.
Liquidity and Financial Risk
Liquidity and leverage ratios are important because they reveal the financial health of a company. LPCN has a current ratio of 10.50 compared to 1.60 for GALT. This means that LPCN can more easily cover its most immediate liabilities over the next twelve months.
LPCN trades at a P/B of 1.64, compared to for GALT. 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
When investing it’s crucial to distinguish between price and value. As Warren Buffet said, “price is what you pay, value is what you get”. LPCN is currently priced at a -84.42% to its one-year price target of 12.00. Comparatively, GALT is -21.43% relative to its price target of 7.00. This suggests that LPCN 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 1.50 for LPCN and 2.00 for GALT, which implies that analysts are more bullish on the outlook for GALT.
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. LPCN has a beta of 0.99 and GALT’s beta is 2.50. LPCN’s shares are therefore the less volatile of the two stocks.
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. LPCN has a short ratio of 4.22 compared to a short interest of 3.07 for GALT. This implies that the market is currently less bearish on the outlook for GALT.
Lipocine Inc. (NASDAQ:LPCN) beats Galectin Therapeutics, Inc. (NASDAQ:GALT) on a total of 5 of the 13 factors compared between the two stocks. LPCN generates a higher return on investment and higher liquidity. LPCN is more undervalued relative to its price target. Finally, ZTS has better sentiment signals based on short interest.