Earnings

Which is more compelling pick right now? – Aytu BioScience, Inc. (AYTU), Sage Therapeutics, Inc. (SAGE)

The shares of Aytu BioScience, Inc. have decreased by more than -82.74% this year alone. The shares recently went up by 21.07% or $0.06 and now trades at $0.38. The shares of Sage Therapeutics, Inc. (NASDAQ:SAGE), has jumped by 6.71% year to date as of 06/12/2018. The shares currently trade at $175.76 and have been able to report a change of 14.06% over the past one week.

The stock of Aytu BioScience, Inc. and Sage Therapeutics, Inc. were two of the most active stocks on Tuesday. Investors seem to be very interested in what happens to the stocks of these two companies but do investors favor one over the other? We will analyze the growth, profitability, risk, valuation, and insider trends of both companies and see which one investors prefer.

Profitability and Returns

Growth alone cannot be used to see if the company will be valuable. Shareholders will be the losers if a company invest in ventures that aren’t profitable enough to support upbeat growth. In order for us to accurately measure profitability and return, we will be using the EBITDA margin and Return on Investment (ROI), which balances the difference in capital structure. These figures suggest that AYTU ventures generate a higher ROI than that of SAGE.

Liquidity and Financial Risk

The ability of a company to meet up with its short-term obligations and be able to clear its longer-term debts is measured using Liquidity and leverage ratios. The current ratio for AYTU is 3.40 and that of SAGE is 28.90. This implies that it is easier for AYTU to cover its immediate obligations over the next 12 months than SAGE. The debt ratio of AYTU is 0.00 compared to 0.00 for SAGE. SAGE can be able to settle its long-term debts and thus is a lower financial risk than AYTU.

Valuation



AYTU currently trades at a P/B of 0.36, and a P/S of 4.02 while SAGE trades at a P/B of 7.35, This means that looking at the earnings, book values and sales basis, AYTU is the cheaper one. It is very obvious that earnings are the most important factors to investors, thus analysts are most likely to place their bet on the P/E.

Analyst Price Targets and Opinions

The mistake some people make is that they think a cheap stock has more value to it. In order to know the value of a stock, there is need to compare its current price to its likely trading price in the future. The price of AYTU is currently at a -96.2% to its one-year price target of 10.00. Looking at its rival pricing, SAGE is at a -15.01% relative to its price target of 206.79.

When looking at the investment recommendation on say a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell), AYTU is given a 2.00 while 1.60 placed for SAGE. This means that analysts are more bullish on the outlook for AYTU stocks.

Insider Activity and Investor Sentiment




Short interest or otherwise called the percentage of a stock’s tradable shares currently being shorted is another data that investors use to get a handle on sentiment. The short ratio for AYTU is 0.05 while that of SAGE is just 6.27. This means that analysts are more bullish on the forecast for AYTU stock.

Conclusion

The stock of Aytu BioScience, Inc. defeats that of Sage Therapeutics, Inc. when the two are compared, with AYTU taking 5 out of the total factors that were been considered. AYTU happens to be more profitable, generates a higher ROI, has higher cash flow per share, higher liquidity and has a lower financial risk. When looking at the stock valuation, AYTU is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for AYTU is better on when it is viewed on short interest.

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