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A Side-by-side Analysis of INSYS Therapeutics, Inc. (INSY) and Hawaiian Holdings, Inc. (HA)

INSYS Therapeutics, Inc. (NASDAQ:INSY) shares are down more than -27.03% this year and recently decreased -3.04% or -$0.22 to settle at $7.02. Hawaiian Holdings, Inc. (NASDAQ:HA), on the other hand, is down -7.90% year to date as of 06/13/2018. It currently trades at $36.70 and has returned -2.78% during the past week.

INSYS Therapeutics, Inc. (NASDAQ:INSY) and Hawaiian Holdings, Inc. (NASDAQ:HA) are the two most active stocks in the Biotechnology industry based on today’s trading volumes. We will compare the two companies based on the strength of various metrics, including growth, profitability, risk, return, and valuation to determine if one is a better investment than the other.

Growth

The ability to consistently grow earnings at a high compound rate is a defining characteristic of the best companies for long-term investment. Analysts expect INSY to grow earnings at a 28.00% annual rate over the next 5 years. Comparatively, HA is expected to grow at a 1.19% annual rate. All else equal, INSY’s higher growth rate would imply a greater potential for capital appreciation.

Profitability and Returns

Just, if not more, important than the growth rate is the quality of that growth. Growth can actual be harmful to investors if it comes at the cost of weak profitability and low returns. To adjust for differences in capital structure we’ll use EBITDA margin and Return on Investment (ROI) as measures of profitability and return. EBITDA margin of 19.08% for Hawaiian Holdings, Inc. (HA). INSY’s ROI is -351.30% while HA has a ROI of 20.30%. The interpretation is that HA’s business generates a higher return on investment than INSY’s.

Cash Flow



Cash is king when it comes to investing. On a percent-of-sales basis, INSY’s free cash flow was 0% while HA converted 3.99% of its revenues into cash flow. This means that, for a given level of sales, HA is able to generate more free cash flow for investors.

Liquidity and Financial Risk

Liquidity and leverage ratios provide insight into the financial health of a company, and allow investors to determine the likelihood that the company will be able to continue operating as a going concern. INSY has a current ratio of 0.80 compared to 0.70 for HA. This means that INSY can more easily cover its most immediate liabilities over the next twelve months. INSY’s debt-to-equity ratio is 0.00 versus a D/E of 0.67 for HA. HA is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

INSY trades at a P/B of 10.97, and a P/S of 4.16, compared to a forward P/E of 6.79, a P/B of 2.24, and a P/S of 0.68 for HA. INSY is the cheaper of the two stocks on an earnings basis but is expensive in terms of P/B 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. INSY is currently priced at a -23.7% to its one-year price target of 9.20. Comparatively, HA is -25.51% relative to its price target of 49.27. This suggests that HA 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. INSY has a beta of 1.23 and HA’s beta is 1.46. INSY’s shares are therefore the less volatile of the two stocks.

Insider Activity and Investor Sentiment




Comparing the number of shares sold short to the float is a method analysts often use to get a reading on investor sentiment. INSY has a short ratio of 18.66 compared to a short interest of 4.08 for HA. This implies that the market is currently less bearish on the outlook for HA.

Summary

Hawaiian Holdings, Inc. (NASDAQ:HA) beats INSYS Therapeutics, Inc. (NASDAQ:INSY) on a total of 8 of the 14 factors compared between the two stocks. HA is growing fastly, generates a higher return on investment, has higher cash flow per share and has a higher cash conversion rate. In terms of valuation, HA is the cheaper of the two stocks on book value and sales basis, HA is more undervalued relative to its price target. Finally, HA has better sentiment signals based on short interest.

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