Endocyte, Inc. (NASDAQ:ECYT) shares are up more than 236.45% this year and recently decreased -1.97% or -$0.29 to settle at $14.40. Paramount Group, Inc. (NYSE:PGRE), on the other hand, is down -5.36% year to date as of 06/13/2018. It currently trades at $15.00 and has returned -2.15% during the past week.
Endocyte, Inc. (NASDAQ:ECYT) and Paramount Group, Inc. (NYSE:PGRE) 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.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 30.37% for Paramount Group, Inc. (PGRE).Cash Flow
The amount of free cash flow available to investors is ultimately what determines the value of a stock. ECYT’s free cash flow (“FCF”) per share for the trailing twelve months was -0.14. Comparatively, PGRE’s free cash flow per share was -0.06. On a percent-of-sales basis, ECYT’s free cash flow was -13.86% while PGRE converted -0% of its revenues into cash flow. This means that, for a given level of sales, PGRE is able to generate more free cash flow for investors.Liquidity and Financial Risk
ECYT’s debt-to-equity ratio is 0.00 versus a D/E of 0.86 for PGRE. PGRE is therefore the more solvent of the two companies, and has lower financial risk.
ECYT trades at a P/B of 4.62, and a P/S of 12604.78, compared to a forward P/E of 125.00, a P/B of 0.87, and a P/S of 5.03 for PGRE. ECYT 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. ECYT is currently priced at a -18.51% to its one-year price target of 17.67. Comparatively, PGRE is -10.45% relative to its price target of 16.75. This suggests that ECYT is the better investment over the next year.
Risk and Volatility
Beta is an important measure that gives investors a sense of the market risk associated with a particular stock. A beta above 1 signals above average market risk, while a beta below 1 implies below average volatility. ECYT has a beta of 0.54 and PGRE’s beta is 0.70. ECYT’s shares are therefore the less volatile of the two stocks.Insider Activity and Investor Sentiment
Short interest, or the percentage of a stock’s tradable shares currently being shorted, is another metric investors use to get a pulse on sentiment. ECYT has a short ratio of 2.43 compared to a short interest of 4.25 for PGRE. This implies that the market is currently less bearish on the outlook for ECYT.Summary
Endocyte, Inc. (NASDAQ:ECYT) beats Paramount Group, Inc. (NYSE:PGRE) on a total of 7 of the 14 factors compared between the two stocks. ECYT higher liquidity and has lower financial risk. ECYT is more undervalued relative to its price target. Finally, ECYT has better sentiment signals based on short interest.