Celgene Corporation (NASDAQ:CELG) shares are down more than -12.27% this year and recently decreased -0.78% or -$0.72 to settle at $91.56. Amicus Therapeutics, Inc. (NASDAQ:FOLD), on the other hand, is up 5.35% year to date as of 03/13/2018. It currently trades at $15.16 and has returned 4.70% during the past week.
Celgene Corporation (NASDAQ:CELG) and Amicus Therapeutics, Inc. (NASDAQ:FOLD) are the two most active stocks in the market based on today’s trading volumes. Investors are clearly interested in the two names, but is one a better choice than the other? We will compare the two companies across growth, profitability, risk, valuation, and insider trends to answer this question.
The ability to grow earnings at a compound rate over time is a crucial determinant of investment value. Analysts expect CELG to grow earnings at a 19.41% annual rate over the next 5 years.
Profitability and Returns
Growth isn’t very attractive to investors if companies are sacrificing profitability and shareholder returns to achieve that growth. We will use EBITDA margin and Return on Investment (ROI), which control for differences in capital structure between the two companies, to measure profitability and return. Celgene Corporation (CELG) has an EBITDA margin of 42.66%. This suggests that CELG underlying business is more profitable CELG’s ROI is 29.40% while FOLD has a ROI of -21.70%. The interpretation is that CELG’s business generates a higher return on investment than FOLD’s.
If there’s one thing investors care more about than earnings, it’s cash flow. CELG’s free cash flow (“FCF”) per share for the trailing twelve months was +2.05. Comparatively, FOLD’s free cash flow per share was -0.32. On a percent-of-sales basis, CELG’s free cash flow was 11.86% while FOLD converted -0.16% of its revenues into cash flow. This means that, for a given level of sales, CELG is able to generate more free cash flow for investors.
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. CELG has a current ratio of 5.00 compared to 5.60 for FOLD. This means that FOLD can more easily cover its most immediate liabilities over the next twelve months. CELG’s debt-to-equity ratio is 1.24 versus a D/E of 0.47 for FOLD. CELG is therefore the more solvent of the two companies, and has lower financial risk.
CELG trades at a forward P/E of 9.03, a P/B of 10.23, and a P/S of 5.45, compared to a P/B of 7.15, and a P/S of 67.94 for FOLD. CELG 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. CELG is currently priced at a -23.08% to its one-year price target of 119.04. Comparatively, FOLD is -23.93% relative to its price target of 19.93. This suggests that FOLD 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 2.20 for CELG and 1.70 for FOLD, which implies that analysts are more bullish on the outlook for CELG.
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. CELG has a beta of 1.54 and FOLD’s beta is 1.53. FOLD’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. CELG has a short ratio of 2.19 compared to a short interest of 8.56 for FOLD. This implies that the market is currently less bearish on the outlook for CELG.
Amicus Therapeutics, Inc. (NASDAQ:FOLD) beats Celgene Corporation (NASDAQ:CELG) on a total of 7 of the 14 factors compared between the two stocks. FOLD is growing fastly and has lower financial risk. In terms of valuation, FOLD is the cheaper of the two stocks on an earnings and book value, FOLD is more undervalued relative to its price target. Finally, STLD has better sentiment signals based on short interest.