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Onconova Therapeutics, Inc. (ONTX) vs. Frank’s International N.V. (FI): Breaking Down the Biotechnology Industry’s Two Hottest Stocks

Onconova Therapeutics, Inc. (NASDAQ:ONTX) shares are down more than -76.01% this year and recently increased 2.83% or $0.01 to settle at $0.36. Frank’s International N.V. (NYSE:FI), on the other hand, is up 13.98% year to date as of 05/16/2018. It currently trades at $7.58 and has returned -4.77% during the past week.

Onconova Therapeutics, Inc. (NASDAQ:ONTX) and Frank’s International N.V. (NYSE:FI) are the two most active stocks in the Biotechnology industry based on today’s trading volumes. Investor interest in the two stocks is clearly very high, but which is the better investment? To answer this question, we will compare the two companies across growth, profitability, risk, and valuation metrics, and also examine their analyst ratings and insider activity trends.

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 EBITDA margin and Return on Investment (ROI), which control for differences in capital structure between the two companies, to measure profitability and return. EBITDA margin of 7.78% for Frank’s International N.V. (FI). ONTX’s ROI is 221.10% while FI has a ROI of -23.60%. The interpretation is that ONTX’s business generates a higher return on investment than FI’s.

Cash Flow

The value of a stock is simply the present value of its future free cash flows. ONTX’s free cash flow (“FCF”) per share for the trailing twelve months was -0.44. Comparatively, FI’s free cash flow per share was -0.12. On a percent-of-sales basis, ONTX’s free cash flow was -1.13% while FI converted -0.01% of its revenues into cash flow. This means that, for a given level of sales, FI is able to generate more free cash flow for investors.

Liquidity and Financial Risk



Liquidity and leverage ratios are important because they reveal the financial health of a company. ONTX has a current ratio of 0.50 compared to 4.60 for FI. This means that FI can more easily cover its most immediate liabilities over the next twelve months.

Valuation

ONTX trades at a P/S of 8.58, compared to a P/B of 1.58, and a P/S of 4.01 for FI. ONTX 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. ONTX is currently priced at a -93.04% to its one-year price target of 5.17. Comparatively, FI is 27.39% relative to its price target of 5.95. This suggests that ONTX 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. ONTX has a beta of 0.45 and FI’s beta is 1.22. ONTX’s shares are therefore the less volatile of the two stocks.

Insider Activity and Investor Sentiment

Short interest is another tool that analysts use to gauge investor sentiment. It represents the percentage of a stock’s tradable shares that are being shorted. ONTX has a short ratio of 2.09 compared to a short interest of 14.43 for FI. This implies that the market is currently less bearish on the outlook for ONTX.

Summary




Frank’s International N.V. (NYSE:FI) beats Onconova Therapeutics, Inc. (NASDAQ:ONTX) on a total of 6 of the 14 factors compared between the two stocks. FI generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate, higher liquidity and has lower financial risk. Finally, CERN has better sentiment signals based on short interest.

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