Finance

Choosing Between Heat Biologics, Inc. (HTBX) and TiVo Corporation (TIVO)

Heat Biologics, Inc. (NASDAQ:HTBX) shares are down more than -52.47% this year and recently increased 7.69% or $0.13 to settle at $1.82. TiVo Corporation (NASDAQ:TIVO), on the other hand, is down -5.13% year to date as of 05/16/2018. It currently trades at $14.80 and has returned 7.64% during the past week.

Heat Biologics, Inc. (NASDAQ:HTBX) and TiVo Corporation (NASDAQ:TIVO) 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.

Growth

Companies that can increase earnings at a high compound rate over time are attractive to investors. Comparatively, TIVO is expected to grow at a 12.00% annual rate. All else equal, TIVO’s higher growth rate would imply a greater potential for capital appreciation.

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 EBITDA margin and Return on Investment (ROI) as measures of profitability and return. EBITDA margin of 22.31% for TiVo Corporation (TIVO). HTBX’s ROI is -277.80% while TIVO has a ROI of 2.80%. The interpretation is that TIVO’s business generates a higher return on investment than HTBX’s.

Cash Flow



If there’s one thing investors care more about than earnings, it’s cash flow. HTBX’s free cash flow (“FCF”) per share for the trailing twelve months was +0.76. Comparatively, TIVO’s free cash flow per share was +0.63. On a percent-of-sales basis, HTBX’s free cash flow was 0.28% while TIVO converted 0.01% of its revenues into cash flow. This means that, for a given level of sales, HTBX 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. HTBX has a current ratio of 1.10 compared to 3.30 for TIVO. This means that TIVO can more easily cover its most immediate liabilities over the next twelve months. HTBX’s debt-to-equity ratio is 0.00 versus a D/E of 0.53 for TIVO. TIVO is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

HTBX trades at a P/B of 1.38, and a P/S of 6.71, compared to a forward P/E of 9.04, a P/B of 0.97, and a P/S of 2.23 for TIVO. HTBX is the cheaper of the two stocks on an earnings basis but is expensive in terms of P/B and P/S 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. HTBX is currently priced at a -93.07% to its one-year price target of 26.25. Comparatively, TIVO is -42.41% relative to its price target of 25.70. This suggests that HTBX 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. HTBX has a beta of 0.77 and TIVO’s beta is -0.28. TIVO’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. HTBX has a short ratio of 0.37 compared to a short interest of 5.78 for TIVO. This implies that the market is currently less bearish on the outlook for HTBX.

Summary

TiVo Corporation (NASDAQ:TIVO) beats Heat Biologics, Inc. (NASDAQ:HTBX) on a total of 7 of the 14 factors compared between the two stocks. TIVO has higher cash flow per share, is more profitable, generates a higher return on investment and higher liquidity. In terms of valuation, TIVO is the cheaper of the two stocks on book value and sales basis, Finally, TYHT has better sentiment signals based on short interest.

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