Athersys, Inc. (NASDAQ:ATHX) shares are up more than 33.15% this year and recently increased 7.59% or $0.17 to settle at $2.41. Amedica Corporation (NASDAQ:AMDA), on the other hand, is down -60.86% year to date as of 05/16/2018. It currently trades at $1.28 and has returned -46.89% during the past week.
Athersys, Inc. (NASDAQ:ATHX) and Amedica Corporation (NASDAQ:AMDA) are the two most active stocks in the Biotechnology industry based on today’s trading volumes. We will compare the two companies based on the strength of various metrics, including growth, profitability, risk, return, and valuation to determine if one is a better investment than the other.Growth
The ability to grow earnings at a compound rate over time is a crucial determinant of investment value. Analysts expect ATHX to grow earnings at a 28.00% annual rate over the next 5 years.Profitability and Returns
Growth isn’t very attractive to investors if companies are sacrificing profitability and shareholder returns to achieve that growth. We will use Return on Investment (ROI), which control for differences in capital structure between the two companies, to measure profitability and return. ATHX’s ROI is -142.20% while AMDA has a ROI of -131.60%. The interpretation is that AMDA’s business generates a higher return on investment than ATHX’s.Cash Flow
The value of a stock is simply the present value of its future free cash flows. ATHX’s free cash flow (“FCF”) per share for the trailing twelve months was -0.05. Comparatively, AMDA’s free cash flow per share was -0.18. On a percent-of-sales basis, ATHX’s free cash flow was -0.19% while AMDA converted -0.01% of its revenues into cash flow. This means that, for a given level of sales, AMDA 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. ATHX has a current ratio of 3.10 compared to 0.40 for AMDA. This means that ATHX can more easily cover its most immediate liabilities over the next twelve months. ATHX’s debt-to-equity ratio is 0.00 versus a D/E of 0.56 for AMDA. AMDA is therefore the more solvent of the two companies, and has lower financial risk.Valuation
ATHX trades at a P/B of 12.05, and a P/S of 90.28, compared to a P/B of 0.74, and a P/S of 0.98 for AMDA. 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
Just because a stock is cheaper doesn’t mean there’s more value to be had. In order to assess value we need to compare the current price to where it’s likely to trade in the future. ATHX is currently priced at a -67.12% to its one-year price target of 7.33. Comparatively, AMDA is -70.57% relative to its price target of 4.35. This suggests that AMDA is the better investment over the next year.
Risk and Volatility
Beta is a metric that investors frequently use to analyze a stock’s systematic risk. A beta above 1 implies above average market volatility. Conversely, a stock with a beta below 1 is seen as less risky than the overall market. ATHX has a beta of -0.87 and AMDA’s beta is -1.04. AMDA’s shares are therefore the less volatile of the two stocks.Insider Activity and Investor Sentiment
Short interest, or the percentage of a stock’s tradable shares currently being shorted, is another metric investors use to get a pulse on sentiment. ATHX has a short ratio of 16.49 compared to a short interest of 0.19 for AMDA. This implies that the market is currently less bearish on the outlook for AMDA.Summary
Amedica Corporation (NASDAQ:AMDA) beats Athersys, Inc. (NASDAQ:ATHX) on a total of 7 of the 14 factors compared between the two stocks. AMDA is growing fastly and has a higher cash conversion rate. In terms of valuation, AMDA is the cheaper of the two stocks on book value and sales basis, AMDA is more undervalued relative to its price target. Finally, AMDA has better sentiment signals based on short interest.