Endocyte, Inc. (NASDAQ:ECYT) shares are up more than 122.43% this year and recently decreased -0.31% or -$0.03 to settle at $9.52. Public Service Enterprise Group Incorporated (NYSE:PEG), on the other hand, is down -3.15% year to date as of 04/13/2018. It currently trades at $49.88 and has returned -0.44% during the past week.
Endocyte, Inc. (NASDAQ:ECYT) and Public Service Enterprise Group Incorporated (NYSE:PEG) are the two most active stocks in the Biotechnology industry 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.Growth
Companies that can increase earnings at a high compound rate over time are attractive to investors. Comparatively, PEG is expected to grow at a 3.39% annual rate. All else equal, PEG’s higher growth rate would imply a greater potential for capital appreciation.Profitability and Returns
Growth in and of itself is not necessarily valuable, and it can even be harmful to shareholders if companies overinvest in unprofitable projects in pursuit of that growth. We will use EBITDA margin and Return on Investment (ROI), which adjust for differences in capital structure, as measure of profitability and return. EBITDA margin of 41.26% for Public Service Enterprise Group Incorporated (PEG).Cash Flow
If there’s one thing investors care more about than earnings, it’s cash flow. ECYT’s free cash flow (“FCF”) per share for the trailing twelve months was -0.13. Comparatively, PEG’s free cash flow per share was -1.64. On a percent-of-sales basis, ECYT’s free cash flow was -12.87% while PEG converted -9.11% of its revenues into cash flow. This means that, for a given level of sales, PEG 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. ECYT has a current ratio of 21.70 compared to 0.80 for PEG. This means that ECYT can more easily cover its most immediate liabilities over the next twelve months. ECYT’s debt-to-equity ratio is 0.00 versus a D/E of 0.98 for PEG. PEG is therefore the more solvent of the two companies, and has lower financial risk.Valuation
ECYT trades at a P/B of 4.78, and a P/S of 9409.84, compared to a forward P/E of 15.54, a P/B of 1.82, and a P/S of 2.77 for PEG. ECYT is the cheaper of the two stocks on an earnings basis but is expensive in terms of P/B and P/S 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
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. ECYT is currently priced at a -29.48% to its one-year price target of 13.50. Comparatively, PEG is -5.12% relative to its price target of 52.57. This suggests that ECYT is the better investment over the next year.
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. ECYT has a beta of 0.49 and PEG’s beta is 0.42. PEG’s shares are therefore the less volatile of the two stocks.Insider Activity and Investor Sentiment
Short interest is another tool that analysts use to gauge investor sentiment. It represents the percentage of a stock’s tradable shares that are being shorted. ECYT has a short ratio of 1.58 compared to a short interest of 3.07 for PEG. This implies that the market is currently less bearish on the outlook for ECYT.Summary
Public Service Enterprise Group Incorporated (NYSE:PEG) beats Endocyte, Inc. (NASDAQ:ECYT) on a total of 7 of the 14 factors compared between the two stocks. PEG has higher cash flow per share, is more profitable, generates a higher return on investment and has a higher cash conversion rate. In terms of valuation, PEG is the cheaper of the two stocks on book value and sales basis, Finally, LUK has better sentiment signals based on short interest.