A Side-by-side Analysis of Bristol-Myers Squibb Company (BMY) and VirnetX Holding Corp (VHC)

Bristol-Myers Squibb Company (NYSE:BMY) shares are down more than -11.75% this year and recently decreased -7.79% or -$4.57 to settle at $54.08. VirnetX Holding Corp (NYSE:VHC), on the other hand, is down -12.16% year to date as of 04/16/2018. It currently trades at $3.25 and has returned -18.75% during the past week.

Bristol-Myers Squibb Company (NYSE:BMY) and VirnetX Holding Corp (NYSE:VHC) are the two most active stocks in the Drug Manufacturers – Major 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.


Companies that can consistently grow earnings at a high compound rate usually have the greatest potential to create value for shareholders in the long-run. Analysts expect BMY to grow earnings at a 11.87% annual rate over the next 5 years. Comparatively, VHC is expected to grow at a 15.00% annual rate. All else equal, VHC’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. Bristol-Myers Squibb Company (BMY) has an EBITDA margin of 28.49%. This suggests that BMY underlying business is more profitable

Cash Flow

The value of a stock is simply the present value of its future free cash flows. BMY’s free cash flow (“FCF”) per share for the trailing twelve months was +0.14. Comparatively, VHC’s free cash flow per share was -0.06. On a percent-of-sales basis, BMY’s free cash flow was 1.1% while VHC converted -0.24% of its revenues into cash flow. This means that, for a given level of sales, BMY is able to generate more free cash flow for investors.

Liquidity and Financial Risk

Liquidity and leverage ratios are important because they reveal the financial health of a company. BMY has a current ratio of 1.60 compared to 1.20 for VHC. This means that BMY can more easily cover its most immediate liabilities over the next twelve months. BMY’s debt-to-equity ratio is 0.68 versus a D/E of 0.00 for VHC. BMY is therefore the more solvent of the two companies, and has lower financial risk.


BMY trades at a forward P/E of 14.13, a P/B of 7.53, and a P/S of 4.27, compared to a P/B of 108.33, and a P/S of 141.09 for VHC. 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. BMY is currently priced at a -17.44% to its one-year price target of 65.50. Comparatively, VHC is 12.85% relative to its price target of 2.88. This suggests that BMY is the better investment over the next year.

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. BMY has a beta of 0.95 and VHC’s beta is 0.71. VHC’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. BMY has a short ratio of 1.40 compared to a short interest of 33.89 for VHC. This implies that the market is currently less bearish on the outlook for BMY.


Bristol-Myers Squibb Company (NYSE:BMY) beats VirnetX Holding Corp (NYSE:VHC) on a total of 9 of the 14 factors compared between the two stocks. BMY is more profitable, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate and higher liquidity. In terms of valuation, BMY is the cheaper of the two stocks on book value and sales basis, BMY is more undervalued relative to its price target. Finally, BMY has better sentiment signals based on short interest.

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