Global

Comparing Endocyte, Inc. (ECYT) and Noble Corporation plc (NE)

Endocyte, Inc. (NASDAQ:ECYT) shares are up more than 356.78% this year and recently increased 3.49% or $0.66 to settle at $19.55. Noble Corporation plc (NYSE:NE), on the other hand, is up 29.87% year to date as of 09/11/2018. It currently trades at $5.87 and has returned -1.34% during the past week.

Endocyte, Inc. (NASDAQ:ECYT) and Noble Corporation plc (NYSE:NE) 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 grow earnings at a compound rate over time is a crucial determinant of investment value. Comparatively, NE is expected to grow at a 5.99% annual rate. All else equal, NE’s higher growth rate would imply a greater potential for capital appreciation.

Cash Flow

Cash is king when it comes to investing. ECYT’s free cash flow (“FCF”) per share for the trailing twelve months was -0.16. Comparatively, NE’s free cash flow per share was -0.17. On a percent-of-sales basis, ECYT’s free cash flow was -16% while NE converted -3.39% of its revenues into cash flow. This means that, for a given level of sales, NE is able to generate more free cash flow for investors.

Liquidity and Financial Risk



Liquidity and leverage ratios are important because they reveal the financial health of a company. ECYT has a current ratio of 28.30 compared to 2.10 for NE. This means that ECYT can more easily cover its most immediate liabilities over the next twelve months. ECYT’s debt-to-equity ratio is 0.00 versus a D/E of 0.88 for NE. NE is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

ECYT trades at a P/B of 8.21, and a P/S of 18846.59, compared to a P/B of 0.33, and a P/S of 1.32 for NE. 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. ECYT is currently priced at a -5.42% to its one-year price target of 20.67. Comparatively, NE is 7.51% relative to its price target of 5.46. This suggests that ECYT is the better investment over the next year.

Risk and Volatility

To gauge the market risk of a particular stock, investors use beta. Stocks with a beta above 1 are more volatile than the market as a whole. Conversely, a beta below 1 implies below average systematic risk. ECYT has a beta of 0.36 and NE’s beta is 2.22. ECYT’s shares are therefore the less volatile of the two stocks.

Insider Activity and Investor Sentiment

Comparing the number of shares sold short to the float is a method analysts often use to get a reading on investor sentiment. ECYT has a short ratio of 4.87 compared to a short interest of 9.35 for NE. This implies that the market is currently less bearish on the outlook for ECYT.

Summary




Endocyte, Inc. (NASDAQ:ECYT) beats Noble Corporation plc (NYSE:NE) on a total of 8 of the 14 factors compared between the two stocks. ECYT generates a higher return on investment, has higher cash flow per share, higher liquidity and has lower financial risk. ECYT is more undervalued relative to its price target. Finally, ECYT has better sentiment signals based on short interest.

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