Global

Comparing Sesen Bio, Inc. (SESN) and Appliance Recycling Centers of America, Inc. (ARCI)

Sesen Bio, Inc. (NASDAQ:SESN) shares are up more than 162.64% this year and recently decreased -4.91% or -$0.11 to settle at $2.13. Appliance Recycling Centers of America, Inc. (NASDAQ:ARCI), on the other hand, is down -25.96% year to date as of 06/13/2018. It currently trades at $0.77 and has returned -1.28% during the past week.

Sesen Bio, Inc. (NASDAQ:SESN) and Appliance Recycling Centers of America, Inc. (NASDAQ:ARCI) 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.

Profitability and Returns

Growth in and of itself is not necessarily valuable, and it can even be harmful to shareholders if companies overinvest in unprofitable projects in pursuit of that growth. We will use Return on Investment (ROI), which adjust for differences in capital structure, as measure of profitability and return. SESN’s ROI is -162.50% while ARCI has a ROI of -1.90%. The interpretation is that ARCI’s business generates a higher return on investment than SESN’s.

Cash Flow

If there’s one thing investors care more about than earnings, it’s cash flow. SESN’s free cash flow (“FCF”) per share for the trailing twelve months was -0.12. Comparatively, ARCI’s free cash flow per share was -0.14. On a percent-of-sales basis, SESN’s free cash flow was -1.35% while ARCI converted -0% of its revenues into cash flow. This means that, for a given level of sales, ARCI 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. SESN has a current ratio of 3.90 compared to 1.70 for ARCI. This means that SESN can more easily cover its most immediate liabilities over the next twelve months. SESN’s debt-to-equity ratio is 0.00 versus a D/E of 0.15 for ARCI. ARCI is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

SESN trades at a P/B of 3.18, compared to a P/B of 0.17, and a P/S of 0.05 for ARCI. SESN is the cheaper of the two stocks on sales basis but is expensive in terms of P/E and P/B 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. SESN is currently priced at a -62.96% to its one-year price target of 5.75. Comparatively, ARCI is -80.75% relative to its price target of 4.00. This suggests that ARCI 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. SESN has a beta of 2.72 and ARCI’s beta is 0.36. ARCI’s shares are therefore the less volatile of the two stocks.

Summary

Appliance Recycling Centers of America, Inc. (NASDAQ:ARCI) beats Sesen Bio, Inc. (NASDAQ:SESN) on a total of 6 of the 14 factors compared between the two stocks. ARCI has higher cash flow per share and has a higher cash conversion rate. ARCI is more undervalued relative to its price target. Finally, ANTH has better sentiment signals based on short interest.

Previous ArticleNext Article

Related Post

Ascena Retail Group, Inc. (ASNA): Are There Still ... Ascena Retail Group, Inc. (NASDAQ:ASNA) trade is getting exciting but lets take a deeper look whether it is as good a moment. Now trading with a marke...
Critical Comparison: Douglas Emmett, Inc. (DEI) vs... Douglas Emmett, Inc. (NYSE:DEI) and Lamar Advertising Company (NASDAQ:LAMR) are the two most active stocks in the REIT - Diversified industry based on...
Nucor Corporation (NUE) is better stock pick than ... The shares of Nucor Corporation have increased by more than 4.62% this year alone. The shares recently went up by 4.62% or $2.94 and now trades at $66...
Uncovering the next great stocks: Achillion Pharma... The shares of Achillion Pharmaceuticals, Inc. have decreased by more than -26.88% this year alone. The shares recently went down by -3.21% or -$0.1 an...
Critical Comparison: The J. M. Smucker Company (SJ... The J. M. Smucker Company (NYSE:SJM) shares are down more than -16.43% this year and recently decreased -1.95% or -$2.07 to settle at $103.83. PAVmed ...