Diamondback Energy, Inc. (NASDAQ:FANG) shares are up more than 4.66% this year and recently increased 2.80% or $3.6 to settle at $132.13. Dare Bioscience, Inc. (NASDAQ:DARE), on the other hand, is down -49.17% year to date as of 05/16/2018. It currently trades at $1.10 and has returned -1.79% during the past week.
Diamondback Energy, Inc. (NASDAQ:FANG) and Dare Bioscience, Inc. (NASDAQ:DARE) are the two most active stocks in the Independent Oil & Gas 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
The ability to grow earnings at a compound rate over time is a crucial determinant of investment value. Analysts expect FANG to grow earnings at a 37.44% 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. Diamondback Energy, Inc. (FANG) has an EBITDA margin of 22.12%. This suggests that FANG underlying business is more profitableLiquidity and Financial Risk
Analysts look at liquidity and leverage ratios to assess how easily a company can cover its liabilities. FANG has a current ratio of 0.50 compared to 8.60 for DARE. This means that DARE can more easily cover its most immediate liabilities over the next twelve months. FANG’s debt-to-equity ratio is 0.31 versus a D/E of 0.00 for DARE. FANG is therefore the more solvent of the two companies, and has lower financial risk.Valuation
FANG trades at a forward P/E of 13.29, a P/B of 2.40, and a P/S of 9.91, compared to a P/B of 0.50, for DARE. FANG is the expensive of the two stocks on an earnings, book value and sales basis. 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”. FANG is currently priced at a -16.31% to its one-year price target of 157.88. Comparatively, DARE is -92.67% relative to its price target of 15.00. This suggests that DARE is the better investment over the next year.
Risk and Volatility
No discussion on value is complete without taking into account risk. Analysts use a stock’s beta, which measures the volatility of a stock compared to the overall market, to measure systematic risk. A stock with a beta above 1 is more volatile than the market. Conversely, a beta below 1 implies a below average level of risk. FANG has a beta of 0.77 and DARE’s beta is 2.74. FANG’s shares are therefore the less volatile of the two stocks.Insider Activity and Investor Sentiment
Analysts often look at short interest, or the percentage of a company’s float currently being shorted by investors, to aid in their outlook for a particular stock. FANG has a short ratio of 2.32 compared to a short interest of 0.72 for DARE. This implies that the market is currently less bearish on the outlook for DARE.Summary
Dare Bioscience, Inc. (NASDAQ:DARE) beats Diamondback Energy, Inc. (NASDAQ:FANG) on a total of 9 of the 13 factors compared between the two stocks. DARE is growing fastly, higher liquidity and has lower financial risk. In terms of valuation, DARE is the cheaper of the two stocks on an earnings, book value and sales basis, DARE is more undervalued relative to its price target. Finally, DARE has better sentiment signals based on short interest.