Adamas Pharmaceuticals, Inc. (NASDAQ:ADMS) shares are up more than 103.02% this year and recently decreased -1.52% or -$0.52 to settle at $33.79. Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA), on the other hand, is down -17.28% year to date as of 12/05/2017. It currently trades at $12.18 and has returned -11.70% during the past week.
Adamas Pharmaceuticals, Inc. (NASDAQ:ADMS) and Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) are the two most active stocks in the Drugs – Generic industry based on today’s 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.
Profitability and Returns
Just, if not more, important than the growth rate is the quality of that growth. Growth can actual be harmful to investors if it comes at the cost of weak profitability and low returns. To adjust for differences in capital structure we’ll use Return on Investment (ROI) as measures of profitability and return. ADMS’s ROI is -46.00% while MNTA has a ROI of -20.10%. The interpretation is that MNTA’s business generates a higher return on investment than ADMS’s.
Cash is king when it comes to investing. ADMS’s free cash flow (“FCF”) per share for the trailing twelve months was -0.70. Comparatively, MNTA’s free cash flow per share was -0.48. On a percent-of-sales basis, ADMS’s free cash flow was -2.8% while MNTA converted -0.03% of its revenues into cash flow. This means that, for a given level of sales, MNTA is able to generate more free cash flow for investors.
Liquidity and Financial Risk
Balance sheet risk is one of the biggest factors to consider before investing. ADMS has a current ratio of 8.30 compared to 4.20 for MNTA. This means that ADMS can more easily cover its most immediate liabilities over the next twelve months. ADMS’s debt-to-equity ratio is 0.41 versus a D/E of 0.00 for MNTA. ADMS is therefore the more solvent of the two companies, and has lower financial risk.
ADMS trades at a P/B of 9.01, and a P/S of 4374.82, compared to a P/B of 2.58, and a P/S of 8.89 for MNTA. 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
When investing it’s crucial to distinguish between price and value. As Warren Buffet said, “price is what you pay, value is what you get”. ADMS is currently priced at a -34.39% to its one-year price target of 51.50. Comparatively, MNTA is -10.9% relative to its price target of 13.67. This suggests that ADMS 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 1.90 for ADMS and 3.00 for MNTA, which implies that analysts are more bullish on the outlook for MNTA.
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. ADMS has a beta of 0.97 and MNTA’s beta is 1.67. ADMS’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. ADMS has a short ratio of 7.68 compared to a short interest of 8.29 for MNTA. This implies that the market is currently less bearish on the outlook for ADMS.
Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) beats Adamas Pharmaceuticals, Inc. (NASDAQ:ADMS) on a total of 6 of the 14 factors compared between the two stocks. MNTA higher liquidity, has higher cash flow per share, has a higher cash conversion rate and has lower financial risk. In terms of valuation, MNTA is the cheaper of the two stocks on book value and sales basis, Finally, CAH has better sentiment signals based on short interest.