Anthera Pharmaceuticals, Inc. (NASDAQ:ANTH) shares are down more than -80.75% this year and recently decreased -5.67% or -$0.02 to settle at $0.32. MACOM Technology Solutions Holdings, Inc. (NASDAQ:MTSI), on the other hand, is down -25.78% year to date as of 06/13/2018. It currently trades at $24.15 and has returned 0.84% during the past week.
Anthera Pharmaceuticals, Inc. (NASDAQ:ANTH) and MACOM Technology Solutions Holdings, Inc. (NASDAQ:MTSI) 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 grow earnings at a compound rate over time is a crucial determinant of investment value. Analysts expect ANTH to grow earnings at a 10.00% annual rate over the next 5 years. Comparatively, MTSI is expected to grow at a 15.50% annual rate. All else equal, MTSI’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 16.14% for MACOM Technology Solutions Holdings, Inc. (MTSI).Cash Flow
Earnings don’t always accurately reflect the amount of cash that a company brings in. ANTH’s free cash flow (“FCF”) per share for the trailing twelve months was -0.42. Comparatively, MTSI’s free cash flow per share was -0.03.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. ANTH has a current ratio of 3.30 compared to 5.40 for MTSI. This means that MTSI can more easily cover its most immediate liabilities over the next twelve months. ANTH’s debt-to-equity ratio is 0.00 versus a D/E of 0.91 for MTSI. MTSI is therefore the more solvent of the two companies, and has lower financial risk.Valuation
ANTH trades at a P/B of 1.27, compared to a forward P/E of 22.01, a P/B of 2.06, and a P/S of 2.37 for MTSI. ANTH is the cheaper of the two stocks on an earnings, book value and sales basis. 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. ANTH is currently priced at a -95.08% to its one-year price target of 6.50. Comparatively, MTSI is -1.75% relative to its price target of 24.58. This suggests that ANTH is the better investment over the next year.
Risk and Volatility
Beta is a metric that investors frequently use to analyze a stock’s systematic risk. A beta above 1 implies above average market volatility. Conversely, a stock with a beta below 1 is seen as less risky than the overall market. ANTH has a beta of 2.61 and MTSI’s beta is 1.76. MTSI’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. ANTH has a short ratio of 1.02 compared to a short interest of 13.79 for MTSI. This implies that the market is currently less bearish on the outlook for ANTH.Summary
Anthera Pharmaceuticals, Inc. (NASDAQ:ANTH) beats MACOM Technology Solutions Holdings, Inc. (NASDAQ:MTSI) on a total of 8 of the 13 factors compared between the two stocks. ANTH generates a higher return on investment and has lower financial risk. In terms of valuation, ANTH is the cheaper of the two stocks on an earnings, book value and sales basis, ANTH is more undervalued relative to its price target. Finally, ANTH has better sentiment signals based on short interest.