Corcept Therapeutics Incorporated (NASDAQ:CORT) shares are down more than -19.32% this year and recently increased 0.62% or $0.09 to settle at $14.57. eGain Corporation (NASDAQ:EGAN), on the other hand, is up 53.33% year to date as of 09/11/2018. It currently trades at $8.05 and has returned -41.88% during the past week.
Corcept Therapeutics Incorporated (NASDAQ:CORT) and eGain Corporation (NASDAQ:EGAN) are the two most active stocks in the Biotechnology industry based on today’s trading volumes. The market is clearly enthusiastic about both these stocks, but which is the better investment? To answer this, we will compare the two companies based on the strength of their growth, profitability, risk, returns, valuation, analyst recommendations, and insider trends.Growth
The ability to grow earnings at a compound rate over time is a crucial determinant of investment value. Analysts expect CORT to grow earnings at a -9.50% annual rate over the next 5 years. Comparatively, EGAN is expected to grow at a 30.00% annual rate. All else equal, EGAN’s higher growth rate would imply a greater potential for capital appreciation.Profitability and Returns
Growth doesn’t mean much if it comes at the cost of weak profitability. To adjust for differences in capital structure we’ll use EBITDA margin and Return on Investment (ROI) as measures of profitability and return. , compared to an EBITDA margin of 4.7% for eGain Corporation (EGAN). CORT’s ROI is 85.00% while EGAN has a ROI of -69.80%. The interpretation is that CORT’s business generates a higher return on investment than EGAN’s.Cash Flow
The value of a stock is simply the present value of its future free cash flows. CORT’s free cash flow (“FCF”) per share for the trailing twelve months was +0.12. Comparatively, EGAN’s free cash flow per share was -. On a percent-of-sales basis, CORT’s free cash flow was 0.01% while EGAN converted 0% of its revenues into cash flow. This means that, for a given level of sales, CORT is able to generate more free cash flow for investors.Liquidity and Financial Risk
Liquidity and leverage ratios measure a company’s ability to meet short-term obligations and longer-term debts. CORT has a current ratio of 6.40 compared to 0.70 for EGAN. This means that CORT can more easily cover its most immediate liabilities over the next twelve months.Valuation
CORT trades at a forward P/E of 14.21, a P/B of 6.91, and a P/S of 7.51, compared to a forward P/E of 230.00, and a P/S of 5.33 for EGAN. CORT is the cheaper of the two stocks on an earnings basis but is expensive in terms of P/B and P/S 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
Investors often compare a stock’s current price to an analyst price target to get a sense of the potential upside within the next year. CORT is currently priced at a -12.75% to its one-year price target of 16.70. Comparatively, EGAN is -38.55% relative to its price target of 13.10. This suggests that EGAN 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. CORT has a beta of 1.63 and EGAN’s beta is -0.42. EGAN’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. CORT has a short ratio of 11.12 compared to a short interest of 2.59 for EGAN. This implies that the market is currently less bearish on the outlook for EGAN.Summary
eGain Corporation (NASDAQ:EGAN) beats Corcept Therapeutics Incorporated (NASDAQ:CORT) on a total of 8 of the 14 factors compared between the two stocks. EGAN is more profitable and has lower financial risk. In terms of valuation, EGAN is the cheaper of the two stocks on book value and sales basis, EGAN is more undervalued relative to its price target. Finally, EGAN has better sentiment signals based on short interest.