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Dissecting the Numbers for Acorda Therapeutics, Inc. (ACOR) and TherapeuticsMD, Inc. (TXMD)

Acorda Therapeutics, Inc. (NASDAQ:ACOR) shares are down more than -10.26% this year and recently decreased -7.45% or -$1.55 to settle at $19.25. TherapeuticsMD, Inc. (NASDAQ:TXMD), on the other hand, is up 2.65% year to date as of 09/11/2018. It currently trades at $6.20 and has returned -2.97% during the past week.

Acorda Therapeutics, Inc. (NASDAQ:ACOR) and TherapeuticsMD, Inc. (NASDAQ:TXMD) 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

Companies that can increase earnings at a high compound rate over time are attractive to investors. Analysts expect ACOR to grow earnings at a 29.00% annual rate over the next 5 years. Comparatively, TXMD is expected to grow at a 15.00% annual rate. All else equal, ACOR’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 Return on Investment (ROI) as measures of profitability and return. ACOR’s ROI is -22.30% while TXMD has a ROI of -59.80%. The interpretation is that ACOR’s business generates a higher return on investment than TXMD’s.

Cash Flow



Earnings don’t always accurately reflect the amount of cash that a company brings in. On a percent-of-sales basis, ACOR’s free cash flow was 0% while TXMD converted -0.17% of its revenues into cash flow. This means that, for a given level of sales, ACOR 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. ACOR has a current ratio of 4.10 compared to 7.90 for TXMD. This means that TXMD can more easily cover its most immediate liabilities over the next twelve months. ACOR’s debt-to-equity ratio is 0.56 versus a D/E of 0.94 for TXMD. TXMD is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

ACOR trades at a P/B of 1.49, and a P/S of 1.57, compared to a P/B of 17.22, and a P/S of 91.23 for TXMD. 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. ACOR is currently priced at a -28.7% to its one-year price target of 27.00. Comparatively, TXMD is -60.91% relative to its price target of 15.86. This suggests that TXMD 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. ACOR has a beta of 1.48 and TXMD’s beta is 1.40. TXMD’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. ACOR has a short ratio of 8.19 compared to a short interest of 24.85 for TXMD. This implies that the market is currently less bearish on the outlook for ACOR.

Summary

Acorda Therapeutics, Inc. (NASDAQ:ACOR) beats TherapeuticsMD, Inc. (NASDAQ:TXMD) on a total of 8 of the 14 factors compared between the two stocks. ACOR is growing fastly, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate and has lower financial risk. In terms of valuation, ACOR is the cheaper of the two stocks on book value and sales basis, Finally, ACOR has better sentiment signals based on short interest.

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