Sucampo Pharmaceuticals, Inc. (NASDAQ:SCMP) shares are up more than 4.80% this year and recently increased 7.88% or $1.12 to settle at $15.32. Synergy Pharmaceuticals Inc. (NASDAQ:SGYP), on the other hand, is down -68.80% year to date as of 12/05/2017. It currently trades at $1.89 and has returned 1.60% during the past week.
Sucampo Pharmaceuticals, Inc. (NASDAQ:SCMP) and Synergy Pharmaceuticals Inc. (NASDAQ:SGYP) are the two most active stocks in the Drug Manufacturers – Other industry based on today’s trading volumes. We will compare the two companies based on the strength of various metrics, including growth, profitability, risk, return, and valuation to determine if one is a better investment than the other.
Companies that can consistently grow earnings at a high compound rate usually have the greatest potential to create value for shareholders in the long-run. Analysts expect SCMP to grow earnings at a 3.00% annual rate over the next 5 years.
Cash is king when it comes to investing. SCMP’s free cash flow (“FCF”) per share for the trailing twelve months was -0.08. Comparatively, SGYP’s free cash flow per share was -0.26.
Liquidity and Financial Risk
Liquidity and leverage ratios are important because they reveal the financial health of a company. SCMP has a current ratio of 5.10 compared to 4.30 for SGYP. This means that SCMP can more easily cover its most immediate liabilities over the next twelve months.
SCMP trades at a forward P/E of 11.38, a P/B of 16.51, and a P/S of 2.52, compared to a P/S of 60.60 for SGYP. SCMP is the cheaper of the two stocks on sales basis but is expensive in terms of P/E and P/B 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. SCMP is currently priced at a 8.42% to its one-year price target of 14.13. Comparatively, SGYP is -75.55% relative to its price target of 7.73. This suggests that SGYP 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 2.40 for SCMP and 2.00 for SGYP, which implies that analysts are more bullish on the outlook for SCMP.
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. SCMP has a beta of 1.41 and SGYP’s beta is 1.29. SGYP’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.SCMP has a short ratio of 6.22 compared to a short interest of 11.58 for SGYP. This implies that the market is currently less bearish on the outlook for SCMP.
Synergy Pharmaceuticals Inc. (NASDAQ:SGYP) beats Sucampo Pharmaceuticals, Inc. (NASDAQ:SCMP) on a total of 6 of the 13 factors compared between the two stocks. SGYP is growing fastly. In terms of valuation, SGYP is the cheaper of the two stocks on an earnings and book value, SGYP is more undervalued relative to its price target. Finally, WBA has better sentiment signals based on short interest.