Link Motion Inc. (NYSE:LKM) shares are down more than -82.59% this year and recently decreased -50.35% or -$0.71 to settle at $0.70. aTyr Pharma, Inc. (NASDAQ:LIFE), on the other hand, is down -75.71% year to date as of 05/16/2018. It currently trades at $0.85 and has returned -63.83% during the past week.
Link Motion Inc. (NYSE:LKM) and aTyr Pharma, Inc. (NASDAQ:LIFE) are the two most active stocks in the Application Software 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
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 LKM to grow earnings at a 40.00% annual rate over the next 5 years.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. LKM has a current ratio of 1.60 compared to 8.40 for LIFE. This means that LIFE can more easily cover its most immediate liabilities over the next twelve months. LKM’s debt-to-equity ratio is 0.50 versus a D/E of 0.31 for LIFE. LKM is therefore the more solvent of the two companies, and has lower financial risk.Valuation
LKM trades at a P/S of 0.53, compared to a P/B of 0.39, for LIFE. LKM is the cheaper of the two stocks on book value basis but is expensive in terms of P/E 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. LKM is currently priced at a -94.62% to its one-year price target of 13.00. Comparatively, LIFE is -84.55% relative to its price target of 5.50. This suggests that LKM 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. LKM has a short ratio of 8.47 compared to a short interest of 1.46 for LIFE. This implies that the market is currently less bearish on the outlook for LIFE.Summary
Link Motion Inc. (NYSE:LKM) beats aTyr Pharma, Inc. (NASDAQ:LIFE) on a total of 6 of the 13 factors compared between the two stocks. LKM is growing fastly, generates a higher return on investment and has higher cash flow per share. LKM is more undervalued relative to its price target. Finally, KOOL has better sentiment signals based on short interest.