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Should You Buy Conatus Pharmaceuticals Inc. (CNAT) or Blink Charging Co. (BLNK)?

Conatus Pharmaceuticals Inc. (NASDAQ:CNAT) shares are up more than 8.87% this year and recently increased 13.54% or $0.6 to settle at $5.03. Blink Charging Co. (NASDAQ:BLNK), on the other hand, is up 38.22% year to date as of 06/12/2018. It currently trades at $6.22 and has returned -5.18% during the past week.

Conatus Pharmaceuticals Inc. (NASDAQ:CNAT) and Blink Charging Co. (NASDAQ:BLNK) 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.

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 CNAT to grow earnings at a 38.00% annual rate over the next 5 years.

Profitability and Returns

A high growth rate isn’t necessarily valuable to investors. In fact, companies that overinvest in low return projects just to achieve a high growth rate can actually destroy shareholder value. Profitability and returns are a measure of the quality of a company’s business and its growth opportunities. We’ll use EBITDA margin and Return on Investment (ROI) to measure this. EBITDA margin of 604.18% for Blink Charging Co. (BLNK). CNAT’s ROI is -42.60% while BLNK has a ROI of 46.60%. The interpretation is that BLNK’s business generates a higher return on investment than CNAT’s.

Cash Flow



Cash is king when it comes to investing. CNAT’s free cash flow (“FCF”) per share for the trailing twelve months was -0.27. Comparatively, BLNK’s free cash flow per share was -0.57. On a percent-of-sales basis, CNAT’s free cash flow was -0.02% while BLNK converted -0.49% of its revenues into cash flow. This means that, for a given level of sales, CNAT 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. CNAT has a current ratio of 2.40 compared to 1.20 for BLNK. This means that CNAT can more easily cover its most immediate liabilities over the next twelve months. CNAT’s debt-to-equity ratio is 0.00 versus a D/E of 0.11 for BLNK. BLNK is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

CNAT trades at a P/B of 6.45, and a P/S of 4.01, compared to a P/B of 20.06, and a P/S of 52.12 for BLNK. 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 isn’t a good investment if the stock is priced accurately. To get a sense of “value” we must compare the current price to some measure of intrinsic value such as a price target. CNAT is currently priced at a -68.22% to its one-year price target of 15.83.

Risk and Volatility

No discussion on value is complete without taking into account risk. Analysts use a stock’s beta, which measures the volatility of a stock compared to the overall market, to measure systematic risk. A stock with a beta above 1 is more volatile than the market. Conversely, a beta below 1 implies a below average level of risk. CNAT has a beta of 1.32 and BLNK’s beta is 3.78. CNAT’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. CNAT has a short ratio of 3.97 compared to a short interest of 0.43 for BLNK. This implies that the market is currently less bearish on the outlook for BLNK.

Summary

Conatus Pharmaceuticals Inc. (NASDAQ:CNAT) beats Blink Charging Co. (NASDAQ:BLNK) on a total of 8 of the 13 factors compared between the two stocks. CNAT is growing fastly, has higher cash flow per share, has a higher cash conversion rate, higher liquidity and has lower financial risk. In terms of valuation, CNAT is the cheaper of the two stocks on book value and sales basis, Finally, INPX has better sentiment signals based on short interest.

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