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Dissecting the Numbers for Vical Incorporated (VICL) and Rayonier Advanced Materials Inc. (RYAM)

Vical Incorporated (NASDAQ:VICL) shares are down more than -41.53% this year and recently decreased -4.46% or -$0.05 to settle at $1.07. Rayonier Advanced Materials Inc. (NYSE:RYAM), on the other hand, is down -15.60% year to date as of 06/13/2018. It currently trades at $17.26 and has returned -5.68% during the past week.

Vical Incorporated (NASDAQ:VICL) and Rayonier Advanced Materials Inc. (NYSE:RYAM) 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

Companies that can increase earnings at a high compound rate over time are attractive to investors. Comparatively, RYAM is expected to grow at a 24.65% annual rate. All else equal, RYAM’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 40.82% for Rayonier Advanced Materials Inc. (RYAM). VICL’s ROI is -21.00% while RYAM has a ROI of 2.50%. The interpretation is that RYAM’s business generates a higher return on investment than VICL’s.

Cash Flow



The amount of free cash flow available to investors is ultimately what determines the value of a stock. VICL’s free cash flow (“FCF”) per share for the trailing twelve months was -0.21. Comparatively, RYAM’s free cash flow per share was -0.06. On a percent-of-sales basis, VICL’s free cash flow was -0.03% while RYAM converted -0% of its revenues into cash flow. This means that, for a given level of sales, RYAM 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. VICL has a current ratio of 18.20 compared to 2.10 for RYAM. This means that VICL can more easily cover its most immediate liabilities over the next twelve months. VICL’s debt-to-equity ratio is 0.00 versus a D/E of 1.71 for RYAM. RYAM is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

VICL trades at a P/B of 0.40, and a P/S of 2.11, compared to a forward P/E of 8.35, a P/B of 1.22, and a P/S of 0.69 for RYAM. 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

Investors often compare a stock’s current price to an analyst price target to get a sense of the potential upside within the next year. VICL is currently priced at a -79.02% to its one-year price target of 5.10. Comparatively, RYAM is -30.96% relative to its price target of 25.00. This suggests that VICL 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. VICL has a beta of 1.20 and RYAM’s beta is 3.42. VICL’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. VICL has a short ratio of 1.20 compared to a short interest of 7.37 for RYAM. This implies that the market is currently less bearish on the outlook for VICL.

Summary

Rayonier Advanced Materials Inc. (NYSE:RYAM) beats Vical Incorporated (NASDAQ:VICL) on a total of 7 of the 14 factors compared between the two stocks. RYAM higher liquidity, is more profitable, generates a higher return on investment, has higher cash flow per share and has a higher cash conversion rate. Finally, AVP has better sentiment signals based on short interest.

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