The Trade Desk, Inc. (NASDAQ:TTD) shares are up more than 75.42% this year and recently increased 7.07% or $5.3 to settle at $80.22. Corbus Pharmaceuticals Holdings, Inc. (NASDAQ:CRBP), on the other hand, is down -11.27% year to date as of 05/15/2018. It currently trades at $6.30 and has returned 0.80% during the past week.
The Trade Desk, Inc. (NASDAQ:TTD) and Corbus Pharmaceuticals Holdings, Inc. (NASDAQ:CRBP) are the two most active stocks in the Application Software 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.Growth
Companies that can consistently grow earnings at a high compound rate usually have the greatest potential to create value for shareholders in the long-run. Analysts expect TTD to grow earnings at a 23.50% annual rate over the next 5 years.Profitability and Returns
A high growth rate isn’t necessarily valuable to investors. In fact, companies that overinvest in low return projects just to achieve a high growth rate can actually destroy shareholder value. Profitability and returns are a measure of the quality of a company’s business and its growth opportunities. We’ll use EBITDA margin and Return on Investment (ROI) to measure this. The Trade Desk, Inc. (TTD) has an EBITDA margin of 23.86%. This suggests that TTD underlying business is more profitable TTD’s ROI is 21.00% while CRBP has a ROI of -56.00%. The interpretation is that TTD’s business generates a higher return on investment than CRBP’s.Cash Flow
The value of a stock is simply the present value of its future free cash flows. TTD’s free cash flow (“FCF”) per share for the trailing twelve months was +0.22. Comparatively, CRBP’s free cash flow per share was -0.05. On a percent-of-sales basis, TTD’s free cash flow was 0% while CRBP converted -0.12% of its revenues into cash flow. This means that, for a given level of sales, TTD is able to generate more free cash flow for investors.Liquidity and Financial Risk
Balance sheet risk is one of the biggest factors to consider before investing. TTD has a current ratio of 1.50 compared to 7.20 for CRBP. This means that CRBP can more easily cover its most immediate liabilities over the next twelve months. TTD’s debt-to-equity ratio is 0.00 versus a D/E of 0.00 for CRBP. TTD is therefore the more solvent of the two companies, and has lower financial risk.Valuation
TTD trades at a forward P/E of 35.34, a P/B of 12.69, and a P/S of 6.75, compared to a P/B of 5.43, and a P/S of 175.32 for CRBP. TTD is the cheaper of the two stocks on sales basis but is expensive in terms of P/E and P/B ratio. 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”. TTD is currently priced at a 18.21% to its one-year price target of 67.86. Comparatively, CRBP is -74.55% relative to its price target of 24.75. This suggests that CRBP is the better investment over the next year.
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. TTD has a short ratio of 7.06 compared to a short interest of 14.31 for CRBP. This implies that the market is currently less bearish on the outlook for TTD.Summary
The Trade Desk, Inc. (NASDAQ:TTD) beats Corbus Pharmaceuticals Holdings, Inc. (NASDAQ:CRBP) on a total of 9 of the 14 factors compared between the two stocks. TTD is growing fastly, is more profitable, generates a higher return on investment, has higher cash flow per share and has a higher cash conversion rate. Finally, TTD has better sentiment signals based on short interest.