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ACADIA Pharmaceuticals Inc. (ACAD) vs. Bloomin’ Brands, Inc. (BLMN): Comparing the Most Active Stocks

ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) shares are down more than -55.20% this year and recently decreased -3.30% or -$0.46 to settle at $13.49. Bloomin’ Brands, Inc. (NASDAQ:BLMN), on the other hand, is down -12.32% year to date as of 09/11/2018. It currently trades at $18.71 and has returned -0.80% during the past week.

ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) and Bloomin’ Brands, Inc. (NASDAQ:BLMN) 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.

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 ACAD to grow earnings at a 22.50% annual rate over the next 5 years. Comparatively, BLMN is expected to grow at a 4.45% annual rate. All else equal, ACAD’s higher growth rate would imply a greater potential for capital appreciation.

Profitability and Returns

Growth isn’t very attractive to investors if companies are sacrificing profitability and shareholder returns to achieve that growth. We will use EBITDA margin and Return on Investment (ROI), which control for differences in capital structure between the two companies, to measure profitability and return. EBITDA margin of 9.13% for Bloomin’ Brands, Inc. (BLMN). ACAD’s ROI is -67.00% while BLMN has a ROI of 11.00%. The interpretation is that BLMN’s business generates a higher return on investment than ACAD’s.

Cash Flow



Earnings don’t always accurately reflect the amount of cash that a company brings in. ACAD’s free cash flow (“FCF”) per share for the trailing twelve months was -0.33. Comparatively, BLMN’s free cash flow per share was -0.04. On a percent-of-sales basis, ACAD’s free cash flow was -0.03% while BLMN converted -0.09% of its revenues into cash flow. This means that, for a given level of sales, ACAD is able to generate more free cash flow for investors.

Liquidity and Financial Risk

Analysts look at liquidity and leverage ratios to assess how easily a company can cover its liabilities. ACAD has a current ratio of 6.10 compared to 0.40 for BLMN. This means that ACAD can more easily cover its most immediate liabilities over the next twelve months. ACAD’s debt-to-equity ratio is 0.00 versus a D/E of 14.04 for BLMN. BLMN is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

ACAD trades at a P/B of 6.36, and a P/S of 9.10, compared to a forward P/E of 12.40, a P/B of 21.26, and a P/S of 0.40 for BLMN. 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 is not necessarily a value stock. Most of the time, a stock is cheap for good reason. A stock only has value if the current price is substantially below the price at which it should trade in the future. ACAD is currently priced at a -55.86% to its one-year price target of 30.56. Comparatively, BLMN is -19.8% relative to its price target of 23.33. This suggests that ACAD 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. ACAD has a beta of 3.49 and BLMN’s beta is 0.32. BLMN’s shares are therefore the less volatile of the two stocks.

Insider Activity and Investor Sentiment




Short interest, or the percentage of a stock’s tradable shares currently being shorted, is another metric investors use to get a pulse on sentiment. ACAD has a short ratio of 5.45 compared to a short interest of 5.04 for BLMN. This implies that the market is currently less bearish on the outlook for BLMN.

Summary

ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) beats Bloomin’ Brands, Inc. (NASDAQ:BLMN) on a total of 8 of the 14 factors compared between the two stocks. ACAD is growing fastly, has a higher cash conversion rate, higher liquidity and has lower financial risk. In terms of valuation, ACAD is the cheaper of the two stocks on an earnings and book value, ACAD is more undervalued relative to its price target. Finally, CSLT has better sentiment signals based on short interest.

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