Under Armour, Inc. (NYSE:UAA) shares are up more than 30.84% this year and recently increased 2.39% or $0.44 to settle at $18.88. Keryx Biopharmaceuticals, Inc. (NASDAQ:KERX), on the other hand, is up 25.16% year to date as of 05/15/2018. It currently trades at $5.82 and has returned 19.75% during the past week.
Under Armour, Inc. (NYSE:UAA) and Keryx Biopharmaceuticals, Inc. (NASDAQ:KERX) are the two most active stocks in the Textile – Apparel Clothing industry based on today’s trading volumes. The market is clearly enthusiastic about both these stocks, but which is the better investment? To answer this, we will compare the two companies based on the strength of their growth, profitability, risk, returns, valuation, analyst recommendations, and insider trends.Growth
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 UAA to grow earnings at a 31.01% annual rate over the next 5 years.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 Return on Investment (ROI), which adjust for differences in capital structure, as measure of profitability and return. UAA’s ROI is 1.00% while KERX has a ROI of -190.10%. The interpretation is that UAA’s business generates a higher return on investment than KERX’s.Cash Flow
Cash is king when it comes to investing. UAA’s free cash flow (“FCF”) per share for the trailing twelve months was -0.08. Comparatively, KERX’s free cash flow per share was -0.28. On a percent-of-sales basis, UAA’s free cash flow was -0.71% while KERX converted -0.06% of its revenues into cash flow. This means that, for a given level of sales, KERX is able to generate more free cash flow for investors.Liquidity and Financial Risk
Liquidity and leverage ratios are important because they reveal the financial health of a company. UAA has a current ratio of 2.00 compared to 2.70 for KERX. This means that KERX can more easily cover its most immediate liabilities over the next twelve months.Valuation
UAA trades at a forward P/E of 61.10, a P/B of 4.15, and a P/S of 1.54, compared to a P/S of 11.51 for KERX. UAA 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”. UAA is currently priced at a 32.21% to its one-year price target of 14.28. Comparatively, KERX is -12.35% relative to its price target of 6.64. This suggests that KERX is the better investment over the next year.
Risk and Volatility
Analyst use beta to measure a stock’s volatility relative to the overall market. Stocks with a beta above 1 tend to have bigger swings in price than the market as a whole, the opposite being the case for stocks with a beta below 1. UAA has a beta of -0.26 and KERX’s beta is 2.64. UAA’s shares are therefore the less volatile of the two stocks.Insider Activity and Investor Sentiment
Short interest is another tool that analysts use to gauge investor sentiment. It represents the percentage of a stock’s tradable shares that are being shorted. UAA has a short ratio of 10.15 compared to a short interest of 16.20 for KERX. This implies that the market is currently less bearish on the outlook for UAA.Summary
Keryx Biopharmaceuticals, Inc. (NASDAQ:KERX) beats Under Armour, Inc. (NYSE:UAA) on a total of 7 of the 14 factors compared between the two stocks. KERX is growing fastly, higher liquidity and has lower financial risk. In terms of valuation, KERX is the cheaper of the two stocks on an earnings and book value, KERX is more undervalued relative to its price target. Finally, ISRG has better sentiment signals based on short interest.