Sangamo Therapeutics, Inc. (NASDAQ:SGMO) and Zosano Pharma Corporation (NASDAQ:ZSAN) 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.
If there’s one thing investors care more about than earnings, it’s cash flow. SGMO’s free cash flow (“FCF”) per share for the trailing twelve months was +0.76. Comparatively, ZSAN’s free cash flow per share was -0.20. On a percent-of-sales basis, SGMO’s free cash flow was 0.33% while ZSAN converted 0% of its revenues into cash flow. This means that, for a given level of sales, SGMO is able to generate more free cash flow for investors.
Liquidity and Financial Risk
Liquidity and leverage ratios are important because they reveal the financial health of a company. SGMO has a current ratio of 6.10 compared to 3.20 for ZSAN. This means that SGMO can more easily cover its most immediate liabilities over the next twelve months. SGMO’s debt-to-equity ratio is 0.02 versus a D/E of 0.44 for ZSAN. ZSAN is therefore the more solvent of the two companies, and has lower financial risk.
SGMO trades at a forward P/B of 5.02, and a P/S of 48.59, compared to a forward P/B of 1.57, for ZSANf
. 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. SGMO is currently priced at a -7.88% to its one-year price target of $14.60. Comparatively, ZSAN is -78% relative to its price target of $4.00. This suggests that ZSAN is the better investment over the next year.
The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 2.00 for SGMO and 2.00 for ZSAN, which implies that analysts are equally bullish on their outlook for the two stocks.
Risk and Volatility
To gauge the market risk of a particular stock, investors use beta. Stocks with a beta above 1 are more volatile than the market as a whole. Conversely, a beta below 1 implies below average systematic risk. SGMO has a beta of 3.12.
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. SGMO has a short ratio of 5.27 compared to a short interest of 8.64 for ZSAN. This implies that the market is currently less bearish on the outlook for SGMO.
Sangamo Therapeutics, Inc. (NASDAQ:SGMO) beats Zosano Pharma Corporation (NASDAQ:ZSAN) on a total of 5 of the 9 factors compared between the two stocks. SGMO has higher cash flow per share, has a higher cash conversion rate, higher liquidity and has lower financial risk. Finally, SGMO has better sentiment signals based on short interest.