Celgene Corporation (NASDAQ:CELG) shares are down more than -14.97% this year and recently increased 2.24% or $1.94 to settle at $88.74. Kohl’s Corporation (NYSE:KSS), on the other hand, is up 47.58% year to date as of 09/13/2018. It currently trades at $80.03 and has returned -1.27% during the past week.

Celgene Corporation (NASDAQ:CELG) and Kohl’s Corporation (NYSE:KSS) are the two most active stocks in the Biotechnology industry based on today’s trading volumes. To determine if one is a better investment than the other, we will compare the two companies’ growth, profitability, risk, return, and valuation characteristics, as well as their analyst ratings and sentiment signals.

**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 CELG to grow earnings at a 19.62% annual rate over the next 5 years. Comparatively, KSS is expected to grow at a 11.09% annual rate. All else equal, CELG’s higher growth rate would imply a greater potential for capital appreciation.

**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., compared to an EBITDA margin of 12.25% for Kohl’s Corporation (KSS). CELG’s ROI is 20.00% while KSS has a ROI of 10.30%. The interpretation is that CELG’s business generates a higher return on investment than KSS’s.

**Cash Flow**

The value of a stock is simply the present value of its future free cash flows. On a percent-of-sales basis, CELG’s free cash flow was 8.49% while KSS converted 0% of its revenues into cash flow. This means that, for a given level of sales, CELG is able to generate more free cash flow for investors.

**Liquidity and Financial Risk**

Analysts look at liquidity and leverage ratios to assess how easily a company can cover its liabilities. CELG has a current ratio of 1.50 compared to 1.80 for KSS. This means that KSS can more easily cover its most immediate liabilities over the next twelve months. CELG’s debt-to-equity ratio is 6.20 versus a D/E of 0.74 for KSS. CELG is therefore the more solvent of the two companies, and has lower financial risk.

**Valuation**

CELG trades at a forward P/E of 8.37, a P/B of 18.53, and a P/S of 4.50, compared to a forward P/E of 13.78, a P/B of 2.47, and a P/S of 0.68 for KSS. CELG 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

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. CELG is currently priced at a -21.09% to its one-year price target of 112.46. Comparatively, KSS is -2.47% relative to its price target of 82.06. This suggests that CELG 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. CELG has a beta of 1.31 and KSS’s beta is 1.29. KSS’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. CELG has a short ratio of 2.84 compared to a short interest of 8.37 for KSS. This implies that the market is currently less bearish on the outlook for CELG.

**Summary**

Celgene Corporation (NASDAQ:CELG) beats Kohl’s Corporation (NYSE:KSS) on a total of 9 of the 14 factors compared between the two stocks. CELG is growing fastly, is more profitable, generates a higher return on investment, has higher cash flow per share and has a higher cash conversion rate. CELG is more undervalued relative to its price target. Finally, CELG has better sentiment signals based on short interest.