Clovis Oncology, Inc. (NASDAQ:CLVS) shares are down more than -33.01% this year and recently decreased -3.90% or -$1.85 to settle at $45.55. Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI), on the other hand, is up 14.51% year to date as of 07/05/2018. It currently trades at $21.70 and has returned 3.83% during the past week.
Clovis Oncology, Inc. (NASDAQ:CLVS) and Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI) 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.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. CLVS’s ROI is -27.30% while SPPI has a ROI of -10.50%. The interpretation is that SPPI’s business generates a higher return on investment than CLVS’s.Cash Flow
Earnings don’t always accurately reflect the amount of cash that a company brings in. CLVS’s free cash flow (“FCF”) per share for the trailing twelve months was -1.99. Comparatively, SPPI’s free cash flow per share was -0.27. On a percent-of-sales basis, CLVS’s free cash flow was -0.19% while SPPI converted -0.02% of its revenues into cash flow. This means that, for a given level of sales, SPPI is able to generate more free cash flow for investors.Liquidity and Financial Risk
Liquidity and leverage ratios provide insight into the financial health of a company, and allow investors to determine the likelihood that the company will be able to continue operating as a going concern. CLVS has a current ratio of 6.60 compared to 3.00 for SPPI. This means that CLVS can more easily cover its most immediate liabilities over the next twelve months. CLVS’s debt-to-equity ratio is 0.92 versus a D/E of 0.12 for SPPI. CLVS is therefore the more solvent of the two companies, and has lower financial risk.Valuation
CLVS trades at a P/B of 7.53, and a P/S of 35.21, compared to a P/B of 6.74, and a P/S of 17.35 for SPPI. 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
Investors often compare a stock’s current price to an analyst price target to get a sense of the potential upside within the next year. CLVS is currently priced at a -39.5% to its one-year price target of 75.29. Comparatively, SPPI is -25.81% relative to its price target of 29.25. This suggests that CLVS 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. CLVS has a beta of 1.37 and SPPI’s beta is 1.97. CLVS’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. CLVS has a short ratio of 5.92 compared to a short interest of 5.73 for SPPI. This implies that the market is currently less bearish on the outlook for SPPI.Summary
Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI) beats Clovis Oncology, Inc. (NASDAQ:CLVS) on a total of 8 of the 14 factors compared between the two stocks. SPPI higher liquidity, has higher cash flow per share, has a higher cash conversion rate and has lower financial risk. In terms of valuation, SPPI is the cheaper of the two stocks on book value and sales basis, Finally, SPPI has better sentiment signals based on short interest.