Onconova Therapeutics, Inc. (NASDAQ:ONTX), on the other hand, is down -67.57% year to date as of 09/11/2018. It currently trades at $0.49 and has returned 11.82% during the past week.
Office Depot, Inc. (NASDAQ:ODP) and Onconova Therapeutics, Inc. (NASDAQ:ONTX) are the two most active stocks in the Specialty Retail, Other 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. Analysts expect ODP to grow earnings at a -2.20% annual rate over the next 5 years.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. Office Depot, Inc. (ODP) has an EBITDA margin of 5.42%. This suggests that ODP underlying business is more profitable ODP’s ROI is 3.10% while ONTX has a ROI of 221.10%. The interpretation is that ONTX’s business generates a higher return on investment than ODP’s.Cash Flow
The value of a stock is simply the present value of its future free cash flows. ODP’s free cash flow (“FCF”) per share for the trailing twelve months was -0.01. Comparatively, ONTX’s free cash flow per share was -0.08. On a percent-of-sales basis, ODP’s free cash flow was -0.05% while ONTX converted -0.86% of its revenues into cash flow. This means that, for a given level of sales, ODP 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. ODP has a current ratio of 1.40 compared to 3.00 for ONTX. This means that ONTX can more easily cover its most immediate liabilities over the next twelve months. ODP’s debt-to-equity ratio is 0.82 versus a D/E of 0.00 for ONTX. ODP is therefore the more solvent of the two companies, and has lower financial risk.Valuation
ODP trades at a forward P/E of 8.45, a P/B of 0.82, and a P/S of 0.16, compared to a P/B of 1.87, and a P/S of 33.00 for ONTX. 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. ODP is currently priced at a 0.96% to its one-year price target of 3.13. Comparatively, ONTX is -83.28% relative to its price target of 2.93. This suggests that ONTX 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. ODP has a beta of 2.67 and ONTX’s beta is 0.65. ONTX’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. ODP has a short ratio of 4.09 compared to a short interest of 3.73 for ONTX. This implies that the market is currently less bearish on the outlook for ONTX.Summary
Onconova Therapeutics, Inc. (NASDAQ:ONTX) beats Office Depot, Inc. (NASDAQ:ODP) on a total of 9 of the 14 factors compared between the two stocks. ONTX is more profitable, generates a higher return on investment, higher liquidity and has lower financial risk. ONTX is more undervalued relative to its price target. Finally, ONTX has better sentiment signals based on short interest.