Earnings

Financial Metrics You Should Care About: Avadel Pharmaceuticals plc (AVDL), ANI Pharmaceuticals, Inc. (ANIP)

The shares of Avadel Pharmaceuticals plc have decreased by more than -36.59% this year alone. The shares recently went down by -13.62% or -$0.82 and now trades at $5.20. The shares of ANI Pharmaceuticals, Inc. (NASDAQ:ANIP), has slumped by -12.43% year to date as of 08/07/2018. The shares currently trade at $56.44 and have been able to report a change of -15.70% over the past one week.

The stock of Avadel Pharmaceuticals plc and ANI Pharmaceuticals, Inc. were two of the most active stocks on Tuesday. 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.

Next 5Y EPS Growth: 7.00% versus 6.70%

When a company is able to grow consistently in terms of earnings at a high compound rate have the highest likelihood of creating value for its shareholders over time. Analysts have predicted that AVDL will grow it’s earning at a 7.00% annual rate in the next 5 years. This is in contrast to ANIP which will have a positive growth at a 6.70% annual rate. This means that the higher growth rate of AVDL implies a greater potential for capital appreciation over the years.

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 AVDL is 38.60% while that of ANIP is 6.50%. These figures suggest that AVDL ventures generate a higher ROI than that of ANIP.

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, AVDL’s free cash flow per share is a negative -0.01, while that of ANIP is positive 0.01.

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 AVDL is 2.70 and that of ANIP is 3.60. This implies that it is easier for AVDL to cover its immediate obligations over the next 12 months than ANIP. The debt ratio of AVDL is 1.88 compared to 1.13 for ANIP. AVDL can be able to settle its long-term debts and thus is a lower financial risk than ANIP.

Valuation

AVDL currently trades at a P/B of 2.30, and a P/S of 1.24 while ANIP trades at a forward P/E of 8.92, a P/B of 3.64, and a P/S of 3.62. This means that looking at the earnings, book values and sales basis, AVDL 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 AVDL is currently at a -68.96% to its one-year price target of 16.75. Looking at its rival pricing, ANIP is at a -28.26% relative to its price target of 78.67.

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), AVDL is given a 1.80 while 1.30 placed for ANIP. This means that analysts are more bullish on the outlook for AVDL 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 AVDL is 6.39 while that of ANIP is just 13.08. This means that analysts are more bullish on the forecast for AVDL stock.

Conclusion

The stock of ANI Pharmaceuticals, Inc. defeats that of Avadel Pharmaceuticals plc when the two are compared, with ANIP taking 6 out of the total factors that were been considered. ANIP 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, ANIP is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for ANIP is better on when it is viewed on short interest.

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