Earnings

Choosing Between Hot Stocks: OvaScience, Inc. (OVAS), Omeros Corporation (OMER)

The shares of OvaScience, Inc. have decreased by more than -36.13% this year alone. The shares recently went up by 11.14% or $0.09 and now trades at $0.89. The shares of Omeros Corporation (NASDAQ:OMER), has slumped by -27.02% year to date as of 04/13/2018. The shares currently trade at $14.18 and have been able to report a change of 4.42% over the past one week.

The stock of OvaScience, Inc. and Omeros Corporation were two of the most active stocks on Friday. 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 OVAS is -78.80% while that of OMER is -53.70%. These figures suggest that OMER ventures generate a higher ROI than that of OVAS.

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, OVAS’s free cash flow per share is a negative -2.62, while that of OMER is also a negative -0.01.

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 current ratio for OVAS is 8.80 and that of OMER is 4.10. This implies that it is easier for OVAS to cover its immediate obligations over the next 12 months than OMER.

Valuation

OVAS currently trades at a P/B of 0.50, and a P/S of 106.43 while OMER trades at a P/S of 11.19. This means that looking at the earnings, book values and sales basis, OVAS 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 OVAS is currently at a -88.88% to its one-year price target of 8.00. Looking at its rival pricing, OMER is at a -60.83% relative to its price target of 36.20.




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), OVAS is given a 3.00 while 2.20 placed for OMER. This means that analysts are more bullish on the outlook for OVAS 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 OVAS is 2.85 while that of OMER is just 6.79. This means that analysts are more bullish on the forecast for OVAS stock.

Conclusion

The stock of OvaScience, Inc. defeats that of Omeros Corporation when the two are compared, with OVAS taking 4 out of the total factors that were been considered. OVAS 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, OVAS is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for OVAS is better on when it is viewed on short interest.

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