First BanCorp. (NYSE:FBP), on the other hand, is up 73.73% year to date as of 11/27/2018. It currently trades at $8.86 and has returned -3.38% during the past week.
Diffusion Pharmaceuticals Inc. (NASDAQ:DFFN) and First BanCorp. (NYSE:FBP) are the two most active stocks based on recent 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 grow earnings at a compound rate over time is a crucial determinant of investment value. Comparatively, FBP is expected to grow at a 34.70% annual rate. All else equal, FBP’s higher growth rate would imply a greater potential for capital appreciation.Profitability and Returns
Growth isn’t very attractive to investors if companies are sacrificing profitability and shareholder returns to achieve that growth. We will use EBITDA margin and Return on Investment (ROI), which control for differences in capital structure between the two companies, to measure profitability and return. EBITDA margin of 54.05% for First BanCorp. (FBP).Liquidity and Financial Risk
DFFN’s debt-to-equity ratio is 0.00 versus a D/E of 0.10 for FBP. FBP is therefore the more solvent of the two companies, and has lower financial risk.
DFFN trades at a P/B of 0.71, compared to a forward P/E of 13.07, a P/B of 1.01, and a P/S of 3.16 for FBP. DFFN is the cheaper of the two stocks on an earnings, book value and sales basis. 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 isn’t a good investment if the stock is priced accurately. To get a sense of “value” we must compare the current price to some measure of intrinsic value such as a price target. DFFN is currently priced at a -76.8% to its one-year price target of 1.25. Comparatively, FBP is -16.96% relative to its price target of 10.67. This suggests that DFFN is the better investment over the next year.
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. DFFN has a beta of -1.39 and FBP’s beta is 1.71. DFFN’s shares are therefore the less volatile of the two stocks.Insider Activity and Investor Sentiment
Short interest, or the percentage of a stock’s tradable shares currently being shorted, is another metric investors use to get a pulse on sentiment. DFFN has a short ratio of 2.37 compared to a short interest of 2.32 for FBP. This implies that the market is currently less bearish on the outlook for FBP.Summary
Diffusion Pharmaceuticals Inc. (NASDAQ:DFFN) beats First BanCorp. (NYSE:FBP) on a total of 7 of the 13 factors compared between the two stocks. DFFN higher liquidity and has lower financial risk. In terms of valuation, DFFN is the cheaper of the two stocks on an earnings, book value and sales basis, DFFN is more undervalued relative to its price target. Finally, EDGE has better sentiment signals based on short interest.