Finance

Should You Buy Net Element, Inc. (NETE) or Bellicum Pharmaceuticals, Inc. (BLCM)?

Net Element, Inc. (NASDAQ:NETE) shares are down more than -14.73% this year and recently increased 17.89% or $1.44 to settle at $9.49. Bellicum Pharmaceuticals, Inc. (NASDAQ:BLCM), on the other hand, is up 6.78% year to date as of 04/13/2018. It currently trades at $8.98 and has returned 40.53% during the past week.

Net Element, Inc. (NASDAQ:NETE) and Bellicum Pharmaceuticals, Inc. (NASDAQ:BLCM) are the two most active stocks in the Internet Content & Information 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.

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 Return on Investment (ROI), which adjust for differences in capital structure, as measure of profitability and return. NETE’s ROI is -42.60% while BLCM has a ROI of -74.50%. The interpretation is that NETE’s business generates a higher return on investment than BLCM’s.

Cash Flow

The value of a stock is simply the present value of its future free cash flows. NETE’s free cash flow (“FCF”) per share for the trailing twelve months was -1.09. Comparatively, BLCM’s free cash flow per share was -0.43. On a percent-of-sales basis, NETE’s free cash flow was -0.01% while BLCM converted -7.6% of its revenues into cash flow. This means that, for a given level of sales, NETE 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. NETE has a current ratio of 1.30 compared to 8.40 for BLCM. This means that BLCM can more easily cover its most immediate liabilities over the next twelve months. NETE’s debt-to-equity ratio is 0.53 versus a D/E of 0.41 for BLCM. NETE is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

NETE trades at a P/B of 1.84, and a P/S of 0.45, compared to a P/B of 3.36, and a P/S of 1382.92 for BLCM. 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”. NETE is currently priced at a -89.54% to its one-year price target of 90.70. Comparatively, BLCM is -55.1% relative to its price target of 20.00. This suggests that NETE 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. NETE has a beta of 0.86 and BLCM’s beta is 0.45. BLCM’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. NETE has a short ratio of 0.68 compared to a short interest of 4.41 for BLCM. This implies that the market is currently less bearish on the outlook for NETE.

Summary




Net Element, Inc. (NASDAQ:NETE) beats Bellicum Pharmaceuticals, Inc. (NASDAQ:BLCM) on a total of 6 of the 14 factors compared between the two stocks. NETE generates a higher return on investment and has a higher cash conversion rate. In terms of valuation, NETE is the cheaper of the two stocks on book value and sales basis, NETE is more undervalued relative to its price target. Finally, NETE has better sentiment signals based on short interest.

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