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Comparing Amedica Corporation (AMDA) and Avid Bioservices, Inc. (CDMO)

Amedica Corporation (NASDAQ:AMDA) shares are down more than -63.91% this year and recently increased 12.38% or $0.13 to settle at $1.18. Avid Bioservices, Inc. (NASDAQ:CDMO), on the other hand, is down -4.38% year to date as of 06/12/2018. It currently trades at $3.71 and has returned 10.75% during the past week.

Amedica Corporation (NASDAQ:AMDA) and Avid Bioservices, Inc. (NASDAQ:CDMO) are the two most active stocks in the Medical Appliances & Equipment 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 Return on Investment (ROI), which control for differences in capital structure between the two companies, to measure profitability and return. AMDA’s ROI is -131.60% while CDMO has a ROI of -52.70%. The interpretation is that CDMO’s business generates a higher return on investment than AMDA’s.

Cash Flow

Cash is king when it comes to investing. On a percent-of-sales basis, AMDA’s free cash flow was -0.02% while CDMO converted 0% of its revenues into cash flow. This means that, for a given level of sales, CDMO 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. AMDA has a current ratio of 0.50 compared to 1.10 for CDMO. This means that CDMO can more easily cover its most immediate liabilities over the next twelve months. AMDA’s debt-to-equity ratio is 0.75 versus a D/E of 0.00 for CDMO. AMDA is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

AMDA trades at a forward P/E of 118.00, a P/B of 0.67, and a P/S of 0.47, compared to a P/B of 5.30, and a P/S of 3.24 for CDMO. 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

When investing it’s crucial to distinguish between price and value. As Warren Buffet said, “price is what you pay, value is what you get”. AMDA is currently priced at a -72.87% to its one-year price target of 4.35. Comparatively, CDMO is -44.38% relative to its price target of 6.67. This suggests that AMDA is the better investment over the next year.

Risk and Volatility

Analyst use beta to measure a stock’s volatility relative to the overall market. Stocks with a beta above 1 tend to have bigger swings in price than the market as a whole, the opposite being the case for stocks with a beta below 1. AMDA has a beta of -1.04 and CDMO’s beta is 2.04. AMDA’s shares are therefore the less volatile of the two stocks.

Insider Activity and Investor Sentiment

Analysts often look at short interest, or the percentage of a company’s float currently being shorted by investors, to aid in their outlook for a particular stock. AMDA has a short ratio of 0.87 compared to a short interest of 2.52 for CDMO. This implies that the market is currently less bearish on the outlook for AMDA.

Summary




Avid Bioservices, Inc. (NASDAQ:CDMO) beats Amedica Corporation (NASDAQ:AMDA) on a total of 7 of the 14 factors compared between the two stocks. CDMO , has higher cash flow per share, has a higher cash conversion rate, higher liquidity and has lower financial risk. Finally, LMFA has better sentiment signals based on short interest.

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