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Aytu BioScience, Inc. (AYTU) vs. Sage Therapeutics, Inc. (SAGE): Comparing the Biotechnology Industry’s Most Active Stocks

Aytu BioScience, Inc. (NASDAQ:AYTU) shares are down more than -82.74% this year and recently increased 21.07% or $0.06 to settle at $0.38. Sage Therapeutics, Inc. (NASDAQ:SAGE), on the other hand, is up 6.71% year to date as of 06/12/2018. It currently trades at $175.76 and has returned 14.06% during the past week.

Aytu BioScience, Inc. (NASDAQ:AYTU) and Sage Therapeutics, Inc. (NASDAQ:SAGE) 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.

Cash Flow

Cash is king when it comes to investing. AYTU’s free cash flow (“FCF”) per share for the trailing twelve months was -0.35. Comparatively, SAGE’s free cash flow per share was -1.79.

Liquidity and Financial Risk

Liquidity and leverage ratios measure a company’s ability to meet short-term obligations and longer-term debts. AYTU has a current ratio of 3.40 compared to 28.90 for SAGE. This means that SAGE can more easily cover its most immediate liabilities over the next twelve months. AYTU’s debt-to-equity ratio is 0.00 versus a D/E of 0.00 for SAGE. AYTU is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

AYTU trades at a P/B of 0.36, and a P/S of 4.02, compared to a P/B of 7.35, for SAGE. AYTU 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

A cheap stock is not necessarily a value stock. Most of the time, a stock is cheap for good reason. A stock only has value if the current price is substantially below the price at which it should trade in the future. AYTU is currently priced at a -96.2% to its one-year price target of 10.00. Comparatively, SAGE is -15.01% relative to its price target of 206.79. This suggests that AYTU 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. AYTU has a beta of 4.09 and SAGE’s beta is 3.00. SAGE’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. AYTU has a short ratio of 0.05 compared to a short interest of 6.27 for SAGE. This implies that the market is currently less bearish on the outlook for AYTU.

Summary

Sage Therapeutics, Inc. (NASDAQ:SAGE) beats Aytu BioScience, Inc. (NASDAQ:AYTU) on a total of 5 of the 13 factors compared between the two stocks. SAGE generates a higher return on investment and has lower financial risk. Finally, HEAR has better sentiment signals based on short interest.

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