Aytu BioScience, Inc. (NASDAQ:AYTU) shares are down more than -81.67% this year and recently increased 3.73% or $0.02 to settle at $0.41. Avaya Holdings Corp. (NYSE:AVYA), on the other hand, is up 24.16% year to date as of 05/15/2018. It currently trades at $21.79 and has returned -6.84% during the past week.
Aytu BioScience, Inc. (NASDAQ:AYTU) and Avaya Holdings Corp. (NYSE:AVYA) are the two most active stocks in the Biotechnology industry based on today’s trading volumes. To determine if one is a better investment than the other, we will compare the two companies’ growth, profitability, risk, return, and valuation characteristics, as well as their analyst ratings and sentiment signals.Cash Flow
The amount of free cash flow available to investors is ultimately what determines the value of a stock. AYTU’s free cash flow (“FCF”) per share for the trailing twelve months was -0.76. Comparatively, AVYA’s free cash flow per share was -3.54. On a percent-of-sales basis, AYTU’s free cash flow was -0.13% while AVYA converted -11.88% of its revenues into cash flow. This means that, for a given level of sales, AYTU 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. AYTU has a current ratio of 1.60 compared to 1.10 for AVYA. This means that AYTU can more easily cover its most immediate liabilities over the next twelve months. AYTU’s debt-to-equity ratio is 0.00 versus a D/E of 1.55 for AVYA. AVYA is therefore the more solvent of the two companies, and has lower financial risk.Valuation
AYTU trades at a P/B of 0.55, and a P/S of 3.12, compared to a forward P/E of 6.54, a P/B of 1.28, and a P/S of 0.83 for AVYA. 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
A cheap stock is not necessarily a value stock. Most of the time, a stock is cheap for good reason. A stock only has value if the current price is substantially below the price at which it should trade in the future. AYTU is currently priced at a -95.9% to its one-year price target of 10.00. Comparatively, AVYA is -27.37% relative to its price target of 30.00. This suggests that AYTU is the better investment over the next year.
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. AYTU has a short ratio of 0.10 compared to a short interest of 2.74 for AVYA. This implies that the market is currently less bearish on the outlook for AYTU.Summary
Aytu BioScience, Inc. (NASDAQ:AYTU) beats Avaya Holdings Corp. (NYSE:AVYA) on a total of 9 of the 14 factors compared between the two stocks. AYTU generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate, higher liquidity and has lower financial risk. In terms of valuation, AYTU is the cheaper of the two stocks on an earnings and book value, AYTU is more undervalued relative to its price target. Finally, AYTU has better sentiment signals based on short interest.