Earnings

Financially Devastating or Fantastic? – Achaogen, Inc. (AKAO), Nordic American Tankers Limited (NAT)

The shares of Achaogen, Inc. have decreased by more than -22.35% this year alone. The shares recently went up by 0.60% or $0.05 and now trades at $8.34. The shares of Nordic American Tankers Limited (NYSE:NAT), has jumped by 2.44% year to date as of 07/12/2018. The shares currently trade at $2.52 and have been able to report a change of -14.86% over the past one week.

The stock of Achaogen, Inc. and Nordic American Tankers Limited were two of the most active stocks on Thursday. Investors seem to be very interested in what happens to the stocks of these two companies but do investors favor one over the other? We will analyze the growth, profitability, risk, valuation, and insider trends of both companies and see which one investors prefer.

Profitability and Returns

Growth alone cannot be used to see if the company will be valuable. Shareholders will be the losers if a company invest in ventures that aren’t profitable enough to support upbeat growth. In order for us to accurately measure profitability and return, we will be using the EBITDA margin and Return on Investment (ROI), which balances the difference in capital structure. The ROI of AKAO is -82.00% while that of NAT is -16.00%. These figures suggest that NAT ventures generate a higher ROI than that of AKAO.

Cash Flow

The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, AKAO’s free cash flow per share is a negative -0.43.

Liquidity and Financial Risk



The ability of a company to meet up with its short-term obligations and be able to clear its longer-term debts is measured using Liquidity and leverage ratios. The current ratio for AKAO is 7.00 and that of NAT is 5.00. This implies that it is easier for AKAO to cover its immediate obligations over the next 12 months than NAT. The debt ratio of AKAO is 0.33 compared to 0.56 for NAT. NAT can be able to settle its long-term debts and thus is a lower financial risk than AKAO.

Valuation

AKAO currently trades at a P/B of 3.59, and a P/S of 66.89 while NAT trades at a P/B of 0.52, and a P/S of 1.30. This means that looking at the earnings, book values and sales basis, AKAO is the cheaper one. It is very obvious that earnings are the most important factors to investors, thus analysts are most likely to place their bet on the P/E.

Analyst Price Targets and Opinions

The mistake some people make is that they think a cheap stock has more value to it. In order to know the value of a stock, there is need to compare its current price to its likely trading price in the future. The price of AKAO is currently at a -52.61% to its one-year price target of 17.60. Looking at its rival pricing, NAT is at a -25.22% relative to its price target of 3.37.




When looking at the investment recommendation on say a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell), AKAO is given a 1.90 while 3.30 placed for NAT. This means that analysts are more bullish on the outlook for NAT stocks.

Insider Activity and Investor Sentiment

Short interest or otherwise called the percentage of a stock’s tradable shares currently being shorted is another data that investors use to get a handle on sentiment. The short ratio for AKAO is 11.11 while that of NAT is just 6.36. This means that analysts are more bullish on the forecast for NAT stock.

Conclusion

The stock of Achaogen, Inc. defeats that of Nordic American Tankers Limited when the two are compared, with AKAO taking 4 out of the total factors that were been considered. AKAO happens to be more profitable, generates a higher ROI, has higher cash flow per share, higher liquidity and has a lower financial risk. When looking at the stock valuation, AKAO is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for AKAO is better on when it is viewed on short interest.

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