Novavax, Inc. (NASDAQ:NVAX) shares are up more than 69.35% this year and recently increased 2.44% or $0.05 to settle at $2.10. Shopify Inc. (NYSE:SHOP), on the other hand, is up 23.36% year to date as of 03/30/2018. It currently trades at $124.59 and has returned -14.34% during the past week.
Novavax, Inc. (NASDAQ:NVAX) and Shopify Inc. (NYSE:SHOP) are the two most active stocks in the Biotechnology 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.Growth
The ability to grow earnings at a compound rate over time is a crucial determinant of investment value. Analysts expect NVAX to grow earnings at a 0.00% annual rate over the next 5 years. Comparatively, SHOP is expected to grow at a 19.00% annual rate. All else equal, SHOP’s higher growth rate would imply a greater potential for capital appreciation.Cash Flow
The amount of free cash flow available to investors is ultimately what determines the value of a stock. NVAX’s free cash flow (“FCF”) per share for the trailing twelve months was -0.11. Comparatively, SHOP’s free cash flow per share was +0.09. On a percent-of-sales basis, NVAX’s free cash flow was -0.12% while SHOP converted 0% of its revenues into cash flow. This means that, for a given level of sales, SHOP is able to generate more free cash flow for investors.Liquidity and Financial Risk
Analysts look at liquidity and leverage ratios to assess how easily a company can cover its liabilities. NVAX has a current ratio of 2.80 compared to 10.80 for SHOP. This means that SHOP can more easily cover its most immediate liabilities over the next twelve months.Valuation
NVAX trades at a P/S of 21.29, compared to a forward P/E of 250.18, a P/B of 12.40, and a P/S of 18.10 for SHOP. 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
When investing it’s crucial to distinguish between price and value. As Warren Buffet said, “price is what you pay, value is what you get”. NVAX is currently priced at a -45.17% to its one-year price target of 3.83. Comparatively, SHOP is -13.99% relative to its price target of 144.85. This suggests that NVAX is the better investment over the next year.
Insider Activity and Investor Sentiment
Analysts often look at short interest, or the percentage of a company’s float currently being shorted by investors, to aid in their outlook for a particular stock. NVAX has a short ratio of 4.35 compared to a short interest of 3.00 for SHOP. This implies that the market is currently less bearish on the outlook for SHOP.Summary
Shopify Inc. (NYSE:SHOP) beats Novavax, Inc. (NASDAQ:NVAX) on a total of 8 of the 14 factors compared between the two stocks. SHOP generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate and higher liquidity. Finally, SHOP has better sentiment signals based on short interest.