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Choosing Between Hudson Technologies Inc. (HDSN) and Viveve Medical, Inc. (VIVE)

Hudson Technologies Inc. (NASDAQ:HDSN) shares are down more than -57.00% this year and recently increased 20.28% or $0.44 to settle at $2.61. Viveve Medical, Inc. (NASDAQ:VIVE), on the other hand, is down -54.53% year to date as of 05/24/2018. It currently trades at $2.26 and has returned 19.58% during the past week.

Hudson Technologies Inc. (NASDAQ:HDSN) and Viveve Medical, Inc. (NASDAQ:VIVE) are the two most active stocks in the Diversified Machinery 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

One of the key things investors look for in a company is the ability to grow earnings at a high compound rate over time. Analysts expect HDSN to grow earnings at a 30.00% annual rate over the next 5 years. Comparatively, VIVE is expected to grow at a 20.00% annual rate. All else equal, HDSN’s higher growth rate would imply a greater potential for capital appreciation.

Profitability and Returns

Growth doesn’t mean much if it comes at the cost of weak profitability. To adjust for differences in capital structure we’ll use EBITDA margin and Return on Investment (ROI) as measures of profitability and return. Hudson Technologies Inc. (HDSN) has an EBITDA margin of 7.91%. This suggests that HDSN underlying business is more profitable

Cash Flow



Cash is king when it comes to investing. HDSN’s free cash flow (“FCF”) per share for the trailing twelve months was +0.22. Comparatively, VIVE’s free cash flow per share was -0.61. On a percent-of-sales basis, HDSN’s free cash flow was 0.01% while VIVE converted -0.12% of its revenues into cash flow. This means that, for a given level of sales, HDSN 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. HDSN has a current ratio of 2.10 compared to 6.50 for VIVE. This means that VIVE can more easily cover its most immediate liabilities over the next twelve months. HDSN’s debt-to-equity ratio is 1.28 versus a D/E of 0.00 for VIVE. HDSN is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

HDSN trades at a forward P/E of 6.17, a P/B of 0.92, and a P/S of 0.79, compared to a P/B of 3.10, and a P/S of 4.39 for VIVE. 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. HDSN is currently priced at a -67.38% to its one-year price target of 8.00. Comparatively, VIVE is -76.36% relative to its price target of 9.56. This suggests that VIVE 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. HDSN has a beta of 1.11 and VIVE’s beta is -0.59. VIVE’s shares are therefore the less volatile of the two stocks.

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. HDSN has a short ratio of 14.84 compared to a short interest of 8.62 for VIVE. This implies that the market is currently less bearish on the outlook for VIVE.

Summary

Viveve Medical, Inc. (NASDAQ:VIVE) beats Hudson Technologies Inc. (NASDAQ:HDSN) on a total of 7 of the 14 factors compared between the two stocks. VIVE is growing fastly and has lower financial risk. VIVE is more undervalued relative to its price target. Finally, VIVE has better sentiment signals based on short interest.

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