Earnings

Comparing Momenta Pharmaceuticals, Inc. (MNTA) and Versartis, Inc. (VSAR)

Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) shares are up more than 2.51% this year and recently increased 2.88% or $0.4 to settle at $14.30. Versartis, Inc. (NASDAQ:VSAR), on the other hand, is down -5.68% year to date as of 01/10/2018. It currently trades at $2.08 and has returned -7.78% during the past week.

Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) and Versartis, Inc. (NASDAQ:VSAR) are the two most active stocks in the Drugs – Generic 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.

Cash Flow 

Cash is king when it comes to investing. MNTA’s free cash flow (“FCF”) per share for the trailing twelve months was -0.48. Comparatively, VSAR’s free cash flow per share was -0.70.



Liquidity and Financial Risk

Balance sheet risk is one of the biggest factors to consider before investing. MNTA has a current ratio of 4.20 compared to 1.50 for VSAR. This means that MNTA can more easily cover its most immediate liabilities over the next twelve months. MNTA’s debt-to-equity ratio is 0.00 versus a D/E of 0.11 for VSAR. VSAR is therefore the more solvent of the two companies, and has lower financial risk.

Valuation




MNTA trades at a P/B of 2.96, and a P/S of 9.83, compared to a P/B of 1.50, for VSAR. 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

Just because a stock is cheaper doesn’t mean there’s more value to be had. In order to assess value we need to compare the current price to where it’s likely to trade in the future. MNTA is currently priced at a 4.61% to its one-year price target of 13.67. Comparatively, VSAR is -50.48% relative to its price target of 4.20. This suggests that VSAR is the better investment over the next year.

The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 3.00 for MNTA and 2.80 for VSAR, which implies that analysts are more bullish on the outlook for MNTA.

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. MNTA has a beta of 1.67 and VSAR’s beta is 2.35. MNTA’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.MNTA has a short ratio of 8.16 compared to a short interest of 2.50 for VSAR. This implies that the market is currently less bearish on the outlook for VSAR.

Summary

Versartis, Inc. (NASDAQ:VSAR) beats Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) on a total of 6 of the 13 factors compared between the two stocks. VSAR has higher cash flow per share. In terms of valuation, VSAR is the cheaper of the two stocks on book value and sales basis, VSAR is more undervalued relative to its price target. Finally, VSAR has better sentiment signals based on short interest.

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