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Dissecting the Numbers for Amedica Corporation (AMDA) and Washington Prime Group Inc. (WPG)

Amedica Corporation (NASDAQ:AMDA) shares are down more than -89.14% this year and recently decreased -1.17% or -$0.01 to settle at $0.35. Washington Prime Group Inc. (NYSE:WPG), on the other hand, is up 5.06% year to date as of 09/11/2018. It currently trades at $7.48 and has returned -0.13% during the past week.

Amedica Corporation (NASDAQ:AMDA) and Washington Prime Group Inc. (NYSE:WPG) are the two most active stocks in the Medical Appliances & Equipment 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.

Profitability and Returns

Growth in and of itself is not necessarily valuable, and it can even be harmful to shareholders if companies overinvest in unprofitable projects in pursuit of that growth. We will use EBITDA margin and Return on Investment (ROI), which adjust for differences in capital structure, as measure of profitability and return. EBITDA margin of 65.13% for Washington Prime Group Inc. (WPG). AMDA’s ROI is -131.60% while WPG has a ROI of 9.40%. The interpretation is that WPG’s business generates a higher return on investment than AMDA’s.

Cash Flow

Cash is king when it comes to investing. AMDA’s free cash flow (“FCF”) per share for the trailing twelve months was -0.67. Comparatively, WPG’s free cash flow per share was +0.03. On a percent-of-sales basis, AMDA’s free cash flow was -0.07% while WPG converted 0% of its revenues into cash flow. This means that, for a given level of sales, WPG is able to generate more free cash flow for investors.

Liquidity and Financial Risk

AMDA’s debt-to-equity ratio is 0.22 versus a D/E of 3.58 for WPG. WPG is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

AMDA trades at a P/B of 0.18, and a P/S of 0.54, compared to a forward P/E of 374.00, a P/B of 1.68, and a P/S of 1.92 for WPG. AMDA is the cheaper of the two stocks on an earnings, book value and sales basis. 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

When investing it’s crucial to distinguish between price and value. As Warren Buffet said, “price is what you pay, value is what you get”. AMDA is currently priced at a -91.95% to its one-year price target of 4.35. Comparatively, WPG is 0.4% relative to its price target of 7.45. This suggests that AMDA 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. AMDA has a beta of -1.35 and WPG’s beta is 0.64. AMDA’s shares are therefore the less volatile of the two stocks.

Insider Activity and Investor Sentiment

The analysis of insider buying and selling trends can be extended to the aggregate level. Short interest, which represents the percentage of a stock’s tradable shares currently being shorted, captures what the market as a whole feels about a stock. AMDA has a short ratio of 0.91 compared to a short interest of 15.19 for WPG. This implies that the market is currently less bearish on the outlook for AMDA.

Summary

Amedica Corporation (NASDAQ:AMDA) beats Washington Prime Group Inc. (NYSE:WPG) on a total of 8 of the 14 factors compared between the two stocks. AMDA higher liquidity and has lower financial risk. In terms of valuation, AMDA is the cheaper of the two stocks on an earnings, book value and sales basis, AMDA is more undervalued relative to its price target. Finally, AMDA has better sentiment signals based on short interest.

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