Agilent Technologies, Inc. (NYSE:A) shares are up more than 2.05% this year and recently decreased -0.13% or -$0.09 to settle at $68.34. Biocept, Inc. (NASDAQ:BIOC), on the other hand, is down -56.98% year to date as of 02/12/2018. It currently trades at $0.30 and has returned -8.15% during the past week.
Agilent Technologies, Inc. (NYSE:A) and Biocept, Inc. (NASDAQ:BIOC) are the two most active stocks in the Medical Laboratories & Research 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 ability to consistently grow earnings at a high compound rate is a defining characteristic of the best companies for long-term investment. Analysts expect A to grow earnings at a 11.45% annual rate over the next 5 years. Comparatively, BIOC is expected to grow at a 40.00% annual rate. All else equal, BIOC’s higher growth rate would imply a greater potential for capital appreciation.
Profitability and Returns
Growth in and of itself is not necessarily valuable, and it can even be harmful to shareholders if companies overinvest in unprofitable projects in pursuit of that growth. We will use EBITDA margin and Return on Investment (ROI), which adjust for differences in capital structure, as measure of profitability and return. Agilent Technologies, Inc. (A) has an EBITDA margin of 24.46%. This suggests that A underlying business is more profitable
If there’s one thing investors care more about than earnings, it’s cash flow. A’s free cash flow (“FCF”) per share for the trailing twelve months was +0.57. Comparatively, BIOC’s free cash flow per share was -0.11. On a percent-of-sales basis, A’s free cash flow was 4.11% while BIOC converted -0.22% of its revenues into cash flow. This means that, for a given level of sales, A is able to generate more free cash flow for investors.
Liquidity and Financial Risk
Analysts look at liquidity and leverage ratios to assess how easily a company can cover its liabilities. A has a current ratio of 3.30 compared to 1.40 for BIOC. This means that A can more easily cover its most immediate liabilities over the next twelve months. A’s debt-to-equity ratio is 0.42 versus a D/E of 0.35 for BIOC. A is therefore the more solvent of the two companies, and has lower financial risk.
A trades at a forward P/E of 23.73, a P/B of 4.56, and a P/S of 4.79, compared to a P/B of 2.13, and a P/S of 1.74 for BIOC. A is the expensive of the two stocks on an earnings, book value and sales basis. 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. A is currently priced at a -10.7% to its one-year price target of 76.53. Comparatively, BIOC is -86.67% relative to its price target of 2.25. This suggests that BIOC 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 1.70 for A and 2.00 for BIOC, which implies that analysts are more bullish on the outlook for BIOC.
Risk and Volatility
Beta is a metric that investors frequently use to analyze a stock’s systematic risk. A beta above 1 implies above average market volatility. Conversely, a stock with a beta below 1 is seen as less risky than the overall market. A has a beta of 1.30 and BIOC’s beta is 1.72. A’s shares are therefore the less volatile of the two stocks.
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. A has a short ratio of 2.52 compared to a short interest of 1.88 for BIOC. This implies that the market is currently less bearish on the outlook for BIOC.
Biocept, Inc. (NASDAQ:BIOC) beats Agilent Technologies, Inc. (NYSE:A) on a total of 7 of the 14 factors compared between the two stocks. BIOC is more profitable and has lower financial risk. In terms of valuation, BIOC is the cheaper of the two stocks on an earnings, book value and sales basis, BIOC is more undervalued relative to its price target. Finally, BIOC has better sentiment signals based on short interest.