Gemphire Therapeutics Inc. (NASDAQ:GEMP) shares are down more than -76.09% this year and recently decreased -9.95% or -$0.21 to settle at $1.90. PolarityTE, Inc. (NASDAQ:COOL), on the other hand, is down -11.89% year to date as of 09/11/2018. It currently trades at $20.45 and has returned -21.89% during the past week.
Gemphire Therapeutics Inc. (NASDAQ:GEMP) and PolarityTE, Inc. (NASDAQ:COOL) are the two most active stocks in the Biotechnology industry based on today’s trading volumes. Investor interest in the two stocks is clearly very high, but which is the better investment? To answer this question, we will compare the two companies across growth, profitability, risk, and valuation metrics, and also examine their analyst ratings and insider activity trends.Growth
Companies that can increase earnings at a high compound rate over time are attractive to investors. Comparatively, COOL is expected to grow at a 15.00% annual rate. All else equal, COOL’s higher growth rate would imply a greater potential for capital appreciation.Cash Flow
The value of a stock is simply the present value of its future free cash flows. GEMP’s free cash flow (“FCF”) per share for the trailing twelve months was -0.44. Comparatively, COOL’s free cash flow per share was -0.52.Liquidity and Financial Risk
Liquidity and leverage ratios are important because they reveal the financial health of a company. GEMP has a current ratio of 4.60 compared to 12.70 for COOL. This means that COOL can more easily cover its most immediate liabilities over the next twelve months. GEMP’s debt-to-equity ratio is 0.68 versus a D/E of 0.00 for COOL. GEMP is therefore the more solvent of the two companies, and has lower financial risk.Valuation
GEMP trades at a P/B of 1.79, compared to a P/B of 6.41, and a P/S of 32438.81 for COOL. 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. GEMP is currently priced at a -36.67% to its one-year price target of 3.00. Comparatively, COOL is -68.54% relative to its price target of 65.00. This suggests that COOL is the better investment over the next year.
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. GEMP has a short ratio of 0.95 compared to a short interest of 6.96 for COOL. This implies that the market is currently less bearish on the outlook for GEMP.Summary
Gemphire Therapeutics Inc. (NASDAQ:GEMP) beats PolarityTE, Inc. (NASDAQ:COOL) on a total of 6 of the 13 factors compared between the two stocks. GEMP generates a higher return on investment and has higher cash flow per share. In terms of valuation, GEMP is the cheaper of the two stocks on book value and sales basis, Finally, GEMP has better sentiment signals based on short interest.