Ampio Pharmaceuticals, Inc. (NYSE:AMPE) shares are down more than -87.56% this year and recently decreased -3.60% or -$0.02 to settle at $0.51. Tesaro, Inc. (NASDAQ:TSRO), on the other hand, is down -57.56% year to date as of 09/11/2018. It currently trades at $35.17 and has returned 6.19% during the past week.
Ampio Pharmaceuticals, Inc. (NYSE:AMPE) and Tesaro, Inc. (NASDAQ:TSRO) are the two most active stocks in the Biotechnology industry based on today’s trading volumes. To determine if one is a better investment than the other, we will compare the two companies’ growth, profitability, risk, return, and valuation characteristics, as well as their analyst ratings and sentiment signals.Growth
Companies that can consistently grow earnings at a high compound rate usually have the greatest potential to create value for shareholders in the long-run. Comparatively, TSRO is expected to grow at a 24.80% annual rate. All else equal, TSRO’s higher growth rate would imply a greater potential for capital appreciation.Cash Flow
Earnings don’t always accurately reflect the amount of cash that a company brings in. AMPE’s free cash flow (“FCF”) per share for the trailing twelve months was -0.04. Comparatively, TSRO’s free cash flow per share was -2.15.Liquidity and Financial Risk
Liquidity and leverage ratios measure a company’s ability to meet short-term obligations and longer-term debts. AMPE has a current ratio of 1.50 compared to 4.10 for TSRO. This means that TSRO can more easily cover its most immediate liabilities over the next twelve months.Valuation
AMPE trades at compared to a P/S of 6.38 for TSRO. AMPE is the cheaper of the two stocks on sales basis but is expensive in terms of P/E and P/B ratio. 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
Just because a stock is cheaper doesn’t mean there’s more value to be had. In order to assess value we need to compare the current price to where it’s likely to trade in the future. AMPE is currently priced at a -96.36% to its one-year price target of 14.00. Comparatively, TSRO is -36.29% relative to its price target of 55.20. This suggests that AMPE is the better investment over the next year.
Risk and Volatility
Analyst use beta to measure a stock’s volatility relative to the overall market. Stocks with a beta above 1 tend to have bigger swings in price than the market as a whole, the opposite being the case for stocks with a beta below 1. AMPE has a beta of -0.13 and TSRO’s beta is 0.99. AMPE’s shares are therefore the less volatile of the two stocks.Insider Activity and Investor Sentiment
Analysts often look at short interest, or the percentage of a company’s float currently being shorted by investors, to aid in their outlook for a particular stock. AMPE has a short ratio of 6.34 compared to a short interest of 4.83 for TSRO. This implies that the market is currently less bearish on the outlook for TSRO.Summary
Ampio Pharmaceuticals, Inc. (NYSE:AMPE) beats Tesaro, Inc. (NASDAQ:TSRO) on a total of 6 of the 12 factors compared between the two stocks. AMPE generates a higher return on investment and has higher cash flow per share. AMPE is more undervalued relative to its price target. Finally, MWA has better sentiment signals based on short interest.