Pain Therapeutics, Inc. (NASDAQ:PTIE) shares are down more than -72.00% this year and recently decreased -0.88% or -$0.01 to settle at $1.12. Graco Inc. (NYSE:GGG), on the other hand, is down -6.37% year to date as of 12/06/2018. It currently trades at $42.34 and has returned -2.64% during the past week.
Pain Therapeutics, Inc. (NASDAQ:PTIE) and Graco Inc. (NYSE:GGG) are the two most active stocks based on recent 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
One of the key things investors look for in a company is the ability to grow earnings at a high compound rate over time. Comparatively, GGG is expected to grow at a 8.00% annual rate. All else equal, GGG’s higher growth rate would imply a greater potential for capital appreciation.Profitability and Returns
Growth in and of itself is not necessarily valuable, and it can even be harmful to shareholders if companies overinvest in unprofitable projects in pursuit of that growth. We will use EBITDA margin and Return on Investment (ROI), which adjust for differences in capital structure, as measure of profitability and return. EBITDA margin of 29.11% for Graco Inc. (GGG).Cash Flow
The amount of free cash flow available to investors is ultimately what determines the value of a stock. PTIE’s free cash flow (“FCF”) per share for the trailing twelve months was -0.12. Comparatively, GGG’s free cash flow per share was +0.28.Liquidity and Financial Risk
Analysts look at liquidity and leverage ratios to assess how easily a company can cover its liabilities. PTIE has a current ratio of 24.00 compared to 2.80 for GGG. This means that PTIE can more easily cover its most immediate liabilities over the next twelve months. PTIE’s debt-to-equity ratio is 0.00 versus a D/E of 0.34 for GGG. GGG is therefore the more solvent of the two companies, and has lower financial risk.Valuation
PTIE trades at a P/B of 0.67, compared to a forward P/E of 20.89, a P/B of 8.89, and a P/S of 4.37 for GGG. PTIE 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. PTIE is currently priced at a -95.28% to its one-year price target of 23.75. Comparatively, GGG is -7.68% relative to its price target of 45.86. This suggests that PTIE is the better investment over the next year.
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. PTIE has a beta of 1.74 and GGG’s beta is 1.19. GGG’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. PTIE has a short ratio of 1.14 compared to a short interest of 4.64 for GGG. This implies that the market is currently less bearish on the outlook for PTIE.Summary
Pain Therapeutics, Inc. (NASDAQ:PTIE) beats Graco Inc. (NYSE:GGG) on a total of 8 of the 13 factors compared between the two stocks. PTIE higher liquidity and has lower financial risk. In terms of valuation, PTIE is the cheaper of the two stocks on an earnings, book value and sales basis, PTIE is more undervalued relative to its price target. Finally, PTIE has better sentiment signals based on short interest.