Regulus Therapeutics Inc. (NASDAQ:RGLS) shares are down more than -80.33% this year and recently decreased -3.76% or -$0.01 to settle at $0.20. Pennsylvania Real Estate Investment Trust (NYSE:PEI), on the other hand, is down -18.50% year to date as of 09/11/2018. It currently trades at $9.69 and has returned -3.10% during the past week.
Regulus Therapeutics Inc. (NASDAQ:RGLS) and Pennsylvania Real Estate Investment Trust (NYSE:PEI) are the two most active stocks in the Biotechnology industry based on today’s trading volumes. Investors are clearly interested in the two names, but is one a better choice than the other? We will compare the two companies across growth, profitability, risk, valuation, and insider trends to answer this question.Growth
The ability to consistently grow earnings at a high compound rate is a defining characteristic of the best companies for long-term investment. Analysts expect RGLS to grow earnings at a 39.60% annual rate over the next 5 years. Comparatively, PEI is expected to grow at a 1.00% annual rate. All else equal, RGLS’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. EBITDA margin of 42.37% for Pennsylvania Real Estate Investment Trust (PEI).Cash Flow
Cash is king when it comes to investing. RGLS’s free cash flow (“FCF”) per share for the trailing twelve months was -0.12. Comparatively, PEI’s free cash flow per share was -0.01. On a percent-of-sales basis, RGLS’s free cash flow was -17.91% while PEI converted -0% of its revenues into cash flow. This means that, for a given level of sales, PEI is able to generate more free cash flow for investors.Liquidity and Financial Risk
RGLS’s debt-to-equity ratio is 1.91 versus a D/E of 2.87 for PEI. PEI is therefore the more solvent of the two companies, and has lower financial risk.
RGLS trades at a P/B of 2.05, and a P/S of 306.84, compared to a P/B of 1.21, and a P/S of 1.84 for PEI. 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
The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 3.00 for RGLS and 3.30 for PEI, which implies that analysts are more bullish on the outlook for PEI.
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. RGLS has a beta of 1.36 and PEI’s beta is 1.08. PEI’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. RGLS has a short ratio of 0.70 compared to a short interest of 16.48 for PEI. This implies that the market is currently less bearish on the outlook for RGLS.Summary
Pennsylvania Real Estate Investment Trust (NYSE:PEI) beats Regulus Therapeutics Inc. (NASDAQ:RGLS) on a total of 7 of the 13 factors compared between the two stocks. PEI is growing fastly, generates a higher return on investment, has higher cash flow per share and has a higher cash conversion rate. In terms of valuation, PEI is the cheaper of the two stocks on book value and sales basis, Finally, CDE has better sentiment signals based on short interest.