Trevena, Inc. (NASDAQ:TRVN) shares are up more than 2.50% this year and recently decreased -4.09% or -$0.07 to settle at $1.64. PDL BioPharma, Inc. (NASDAQ:PDLI), on the other hand, is down -13.50% year to date as of 09/11/2018. It currently trades at $2.37 and has returned -1.25% during the past week.
Trevena, Inc. (NASDAQ:TRVN) and PDL BioPharma, Inc. (NASDAQ:PDLI) 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 grow earnings at a compound rate over time is a crucial determinant of investment value. Comparatively, PDLI is expected to grow at a 14.00% annual rate. All else equal, PDLI’s higher growth rate would imply a greater potential for capital appreciation.Cash Flow
Cash is king when it comes to investing. TRVN’s free cash flow (“FCF”) per share for the trailing twelve months was -0.08. Comparatively, PDLI’s free cash flow per share was -0.06.Liquidity and Financial Risk
Analysts look at liquidity and leverage ratios to assess how easily a company can cover its liabilities. TRVN has a current ratio of 3.40 compared to 11.10 for PDLI. This means that PDLI can more easily cover its most immediate liabilities over the next twelve months. TRVN’s debt-to-equity ratio is 0.60 versus a D/E of 0.17 for PDLI. TRVN is therefore the more solvent of the two companies, and has lower financial risk.Valuation
TRVN trades at a P/B of 2.93, and a P/S of 50.50, compared to a forward P/E of 20.61, a P/B of 0.49, and a P/S of 1.64 for PDLI. TRVN 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
Just because a stock is cheaper doesn’t mean there’s more value to be had. In order to assess value we need to compare the current price to where it’s likely to trade in the future. TRVN is currently priced at a -80.89% to its one-year price target of 8.58. Comparatively, PDLI is -21% relative to its price target of 3.00. This suggests that TRVN 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. TRVN has a beta of -0.36 and PDLI’s beta is 0.34. TRVN’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. TRVN has a short ratio of 4.71 compared to a short interest of 12.96 for PDLI. This implies that the market is currently less bearish on the outlook for TRVN.Summary
PDL BioPharma, Inc. (NASDAQ:PDLI) beats Trevena, Inc. (NASDAQ:TRVN) on a total of 7 of the 13 factors compared between the two stocks. PDLI , generates a higher return on investment, has higher cash flow per share, higher liquidity and has lower financial risk. In terms of valuation, PDLI is the cheaper of the two stocks on book value and sales basis, Finally, LTS has better sentiment signals based on short interest.