Global

A Side-by-side Analysis of Verastem, Inc. (VSTM) and MagneGas Corporation (MNGA)

Verastem, Inc. (NASDAQ:VSTM) shares are up more than 198.70% this year and recently increased 1.33% or $0.12 to settle at $9.17. MagneGas Corporation (NASDAQ:MNGA), on the other hand, is down -96.35% year to date as of 09/11/2018. It currently trades at $0.17 and has returned -14.38% during the past week.

Verastem, Inc. (NASDAQ:VSTM) and MagneGas Corporation (NASDAQ:MNGA) are the two most active stocks in the Biotechnology 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.

Growth

The ability to consistently grow earnings at a high compound rate is a defining characteristic of the best companies for long-term investment. Analysts expect VSTM to grow earnings at a 1.74% annual rate over the next 5 years.

Cash Flow

The value of a stock is simply the present value of its future free cash flows. VSTM’s free cash flow (“FCF”) per share for the trailing twelve months was -0.18. Comparatively, MNGA’s free cash flow per share was -0.07.

Liquidity and Financial Risk



Liquidity and leverage ratios measure a company’s ability to meet short-term obligations and longer-term debts. VSTM has a current ratio of 7.70 compared to 1.40 for MNGA. This means that VSTM can more easily cover its most immediate liabilities over the next twelve months. VSTM’s debt-to-equity ratio is 0.20 versus a D/E of 0.08 for MNGA. VSTM is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

VSTM trades at a P/B of 4.43, and a P/S of 65.99, compared to a P/B of 0.19, and a P/S of 1.11 for MNGA. 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

When investing it’s crucial to distinguish between price and value. As Warren Buffet said, “price is what you pay, value is what you get”. VSTM is currently priced at a -35.83% to its one-year price target of 14.29. Comparatively, MNGA is -97.17% relative to its price target of 6.00. This suggests that MNGA is the better investment over the next year.

Risk and Volatility

No discussion on value is complete without taking into account risk. Analysts use a stock’s beta, which measures the volatility of a stock compared to the overall market, to measure systematic risk. A stock with a beta above 1 is more volatile than the market. Conversely, a beta below 1 implies a below average level of risk. VSTM has a beta of 2.76 and MNGA’s beta is -0.65. MNGA’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. VSTM has a short ratio of 2.11 compared to a short interest of 0.76 for MNGA. This implies that the market is currently less bearish on the outlook for MNGA.

Summary




MagneGas Corporation (NASDAQ:MNGA) beats Verastem, Inc. (NASDAQ:VSTM) on a total of 7 of the 13 factors compared between the two stocks. MNGA is growing fastly and has lower financial risk. In terms of valuation, MNGA is the cheaper of the two stocks on book value and sales basis, MNGA is more undervalued relative to its price target. Finally, MNGA has better sentiment signals based on short interest.

Previous ArticleNext Article

Related Post

Should You Buy The Coca-Cola Company (KO) or South... The Coca-Cola Company (NYSE:KO) shares are down more than -2.51% this year and recently decreased -0.02% or -$0.01 to settle at $44.73. Southwest Airl...
A Side-by-side Analysis of Hologic, Inc. (HOLX) an... The Charles Schwab Corporation (NYSE:SCHW) shares are down more than -1.85% this year and recently decreased -0.57% or -$0.29 to settle at $50.42. Hol...
Altaba Inc. (AABA) and CA, Inc. (CA) Go Head-to-he... Altaba Inc. (NASDAQ:AABA) shares are down more than -2.41% this year and recently increased 0.04% or $0.03 to settle at $68.17. CA, Inc. (NASDAQ:CA), ...
Comparing Antares Pharma, Inc. (ATRS) and Azul S.A... Antares Pharma, Inc. (NASDAQ:ATRS) shares are up more than 64.82% this year and recently decreased -2.96% or -$0.1 to settle at $3.28. Azul S.A. (NYSE...
Choosing Between Marvell Technology Group Ltd. (MR... Marvell Technology Group Ltd. (NASDAQ:MRVL) shares are up more than 1.26% this year and recently decreased -0.55% or -$0.12 to settle at $21.74. L Bra...