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Choosing Between Antares Pharma, Inc. (ATRS) and Affimed N.V. (AFMD)

Antares Pharma, Inc. (NASDAQ:ATRS) shares are up more than 29.15% this year and recently increased 3.21% or $0.08 to settle at $2.57. Affimed N.V. (NASDAQ:AFMD), on the other hand, is up 86.54% year to date as of 05/16/2018. It currently trades at $2.42 and has returned 12.79% during the past week.

Antares Pharma, Inc. (NASDAQ:ATRS) and Affimed N.V. (NASDAQ:AFMD) are the two most active stocks in the Medical Instruments & Supplies 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.

Profitability and Returns

Growth doesn’t mean much if it comes at the cost of weak profitability. To adjust for differences in capital structure we’ll use Return on Investment (ROI) as measures of profitability and return. ATRS’s ROI is -28.20% while AFMD has a ROI of -70.20%. The interpretation is that ATRS’s business generates a higher return on investment than AFMD’s.

Cash Flow

Cash is king when it comes to investing. ATRS’s free cash flow (“FCF”) per share for the trailing twelve months was -0.04. Comparatively, AFMD’s free cash flow per share was -0.13. On a percent-of-sales basis, ATRS’s free cash flow was -0.01% while AFMD converted -0.36% of its revenues into cash flow. This means that, for a given level of sales, ATRS is able to generate more free cash flow for investors.

Liquidity and Financial Risk



Liquidity and leverage ratios provide insight into the financial health of a company, and allow investors to determine the likelihood that the company will be able to continue operating as a going concern. ATRS has a current ratio of 2.90 compared to 5.60 for AFMD. This means that AFMD can more easily cover its most immediate liabilities over the next twelve months. ATRS’s debt-to-equity ratio is 0.88 versus a D/E of 0.23 for AFMD. ATRS is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

ATRS trades at a forward P/E of 44.31, a P/B of 14.28, and a P/S of 7.18, compared to a P/B of 2.92, and a P/S of 61.96 for AFMD. ATRS 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

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. ATRS is currently priced at a -32.72% to its one-year price target of 3.82. Comparatively, AFMD is -67.65% relative to its price target of 7.48. This suggests that AFMD is the better investment over the next year.

Risk and Volatility

Beta is an important measure that gives investors a sense of the market risk associated with a particular stock. A beta above 1 signals above average market risk, while a beta below 1 implies below average volatility. ATRS has a beta of 0.19 and AFMD’s beta is 2.30. ATRS’s shares are therefore the less volatile of the two stocks.

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. ATRS has a short ratio of 5.79 compared to a short interest of 0.88 for AFMD. This implies that the market is currently less bearish on the outlook for AFMD.

Summary




Affimed N.V. (NASDAQ:AFMD) beats Antares Pharma, Inc. (NASDAQ:ATRS) on a total of 6 of the 14 factors compared between the two stocks. AFMD generates a higher return on investment and has lower financial risk. In terms of valuation, AFMD is the cheaper of the two stocks on an earnings and book value, AFMD is more undervalued relative to its price target. Finally, AFMD has better sentiment signals based on short interest.

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