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Choosing Between Athersys, Inc. (ATHX) and Oxford Industries, Inc. (OXM)

Athersys, Inc. (NASDAQ:ATHX) shares are up more than 29.28% this year and recently decreased -4.68% or -$0.11 to settle at $2.34. Oxford Industries, Inc. (NYSE:OXM), on the other hand, is up 17.24% year to date as of 06/13/2018. It currently trades at $88.15 and has returned -2.14% during the past week.

Athersys, Inc. (NASDAQ:ATHX) and Oxford Industries, Inc. (NYSE:OXM) are the two most active stocks in the Biotechnology industry based on today’s trading volumes. The market is clearly enthusiastic about both these stocks, but which is the better investment? To answer this, we will compare the two companies based on the strength of their growth, profitability, risk, returns, valuation, analyst recommendations, and insider trends.

Growth

One of the key things investors look for in a company is the ability to grow earnings at a high compound rate over time. Analysts expect ATHX to grow earnings at a 28.00% annual rate over the next 5 years. Comparatively, OXM is expected to grow at a 10.00% annual rate. All else equal, ATHX’s higher growth rate would imply a greater potential for capital appreciation.

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 11.79% for Oxford Industries, Inc. (OXM). ATHX’s ROI is -142.20% while OXM has a ROI of 11.80%. The interpretation is that OXM’s business generates a higher return on investment than ATHX’s.

Cash Flow



Cash is king when it comes to investing. ATHX’s free cash flow (“FCF”) per share for the trailing twelve months was -0.05. Comparatively, OXM’s free cash flow per share was +2.17. On a percent-of-sales basis, ATHX’s free cash flow was -0.19% while OXM converted 3.38% of its revenues into cash flow. This means that, for a given level of sales, OXM 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. ATHX has a current ratio of 5.00 compared to 1.70 for OXM. This means that ATHX can more easily cover its most immediate liabilities over the next twelve months. ATHX’s debt-to-equity ratio is 0.00 versus a D/E of 0.11 for OXM. OXM is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

ATHX trades at a P/B of 6.32, and a P/S of 99.61, compared to a forward P/E of 17.64, a P/B of 3.41, and a P/S of 1.36 for OXM. ATHX 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 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. ATHX is currently priced at a -68.08% to its one-year price target of 7.33. Comparatively, OXM is 2.2% relative to its price target of 86.25. This suggests that ATHX 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. ATHX has a beta of -0.85 and OXM’s beta is 0.32. ATHX’s shares are therefore the less volatile of the two stocks.

Insider Activity and Investor Sentiment




Short interest is another tool that analysts use to gauge investor sentiment. It represents the percentage of a stock’s tradable shares that are being shorted. ATHX has a short ratio of 11.57 compared to a short interest of 7.39 for OXM. This implies that the market is currently less bearish on the outlook for OXM.

Summary

Oxford Industries, Inc. (NYSE:OXM) beats Athersys, Inc. (NASDAQ:ATHX) on a total of 7 of the 14 factors compared between the two stocks. OXM 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, OXM is the cheaper of the two stocks on book value and sales basis, Finally, OXM has better sentiment signals based on short interest.

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