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Choosing Between Hot Stocks: Banco Santander (Brasil) S.A. (BSBR), Genocea Biosciences, Inc. (GNCA)

The shares of Banco Santander (Brasil) S.A. have increased by more than 17.76% this year alone. The shares recently went up by 4.29% or $0.46 and now trades at $11.18. The shares of Genocea Biosciences, Inc. (NASDAQ:GNCA), has slumped by -17.84% year to date as of 02/06/2018. The shares currently trade at $0.95 and have been able to report a change of 4.43% over the past one week.

The stock of Banco Santander (Brasil) S.A. and Genocea Biosciences, Inc. were two of the most active stocks on Tuesday. Investors seem to be very interested in what happens to the stocks of these two companies but do investors favor one over the other? We will analyze the growth, profitability, risk, valuation, and insider trends of both companies and see which one investors prefer.

Profitability and Returns

Growth alone cannot be used to see if the company will be valuable. Shareholders will be the losers if a company invest in ventures that aren’t profitable enough to support upbeat growth. In order for us to accurately measure profitability and return, we will be using the EBITDA margin and Return on Investment (ROI), which balances the difference in capital structure. The ROI of BSBR is 4.30% while that of GNCA is -77.30%. These figures suggest that BSBR ventures generate a higher ROI than that of GNCA.



Cash Flow 

The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, BSBR’s free cash flow per share is a positive 42.03, while that of GNCA is negative -14.38.

Liquidity and Financial Risk




The ability of a company to meet up with its short-term obligations and be able to clear its longer-term debts is measured using Liquidity and leverage ratios. The debt ratio of BSBR is 0.89 compared to 4.24 for GNCA. GNCA can be able to settle its long-term debts and thus is a lower financial risk than BSBR.

Valuation

BSBR currently trades at a forward P/E of 12.85, a P/B of 1.49, and a P/S of 1.85 while GNCA trades at a P/B of 7.33, This means that looking at the earnings, book values and sales basis, BSBR is the cheaper one. It is very obvious that earnings are the most important factors to investors, thus analysts are most likely to place their bet on the P/E.

Analyst Price Targets and Opinions

The mistake some people make is that they think a cheap stock has more value to it. In order to know the value of a stock, there is need to compare its current price to its likely trading price in the future. The price of BSBR is currently at a 15.26% to its one-year price target of 9.70. Looking at its rival pricing, GNCA is at a -88.82% relative to its price target of 8.50. This figure implies that over the next one year, GNCA is a better investment.

When looking at the investment recommendation on say a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell), BSBR is given a 3.20 while 2.30 placed for GNCA. This means that analysts are more bullish on the outlook for BSBR stocks.

Insider Activity and Investor Sentiment

Short interest or otherwise called the percentage of a stock’s tradable shares currently being shorted is another data that investors use to get a handle on sentiment. The short ratio for BSBR is 3.47 while that of GNCA is just 1.92. This means that analysts are more bullish on the forecast for GNCA stock.

Conclusion

The stock of Banco Santander (Brasil) S.A. defeats that of Genocea Biosciences, Inc. when the two are compared, with BSBR taking 6 out of the total factors that were been considered. BSBR happens to be more profitable, generates a higher ROI, has higher cash flow per share, higher liquidity and has a lower financial risk. When looking at the stock valuation, BSBR is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for BSBR is better on when it is viewed on short interest.

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