Viking Therapeutics, Inc. (NASDAQ:VKTX) shares are up more than 177.59% this year and recently decreased -1.40% or -$0.16 to settle at $11.27. Regional Health Properties, Inc. (NYSE:RHE), on the other hand, is down -20.59% year to date as of 09/11/2018. It currently trades at $0.14 and has returned 3.20% during the past week.
Viking Therapeutics, Inc. (NASDAQ:VKTX) and Regional Health Properties, Inc. (NYSE:RHE) are the two most active stocks in the Biotechnology 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.Growth
Companies that can increase earnings at a high compound rate over time are attractive to investors. Analysts expect VKTX to grow earnings at a 40.00% annual rate over the next 5 years.Profitability and Returns
A high growth rate isn’t necessarily valuable to investors. In fact, companies that overinvest in low return projects just to achieve a high growth rate can actually destroy shareholder value. Profitability and returns are a measure of the quality of a company’s business and its growth opportunities. We’ll use EBITDA margin and Return on Investment (ROI) to measure this. EBITDA margin of 28.26% for Regional Health Properties, Inc. (RHE).Liquidity and Financial Risk
Balance sheet risk is one of the biggest factors to consider before investing. VKTX has a current ratio of 35.10 compared to 0.20 for RHE. This means that VKTX can more easily cover its most immediate liabilities over the next twelve months.Valuation
VKTX trades at a P/B of 4.24, compared to a P/S of 0.10 for RHE. VKTX is the cheaper of the two stocks on sales basis but is expensive in terms of P/E and P/B 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. VKTX is currently priced at a -21.35% to its one-year price target of 14.33.
Risk and Volatility
No discussion on value is complete without taking into account risk. Analysts use a stock’s beta, which measures the volatility of a stock compared to the overall market, to measure systematic risk. A stock with a beta above 1 is more volatile than the market. Conversely, a beta below 1 implies a below average level of risk. VKTX has a beta of 2.90 and RHE’s beta is 0.27. RHE’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. VKTX has a short ratio of 4.10 compared to a short interest of 1.60 for RHE. This implies that the market is currently less bearish on the outlook for RHE.Summary
Regional Health Properties, Inc. (NYSE:RHE) beats Viking Therapeutics, Inc. (NASDAQ:VKTX) on a total of 8 of the 12 factors compared between the two stocks. RHE is growing fastly, generates a higher return on investment, has higher cash flow per share and has lower financial risk. Finally, RHE has better sentiment signals based on short interest.