Global

Choosing Between Celgene Corporation (CELG) and Cousins Properties Incorporated (CUZ)

Celgene Corporation (NASDAQ:CELG) shares are down more than -23.36% this year and recently decreased -1.70% or -$1.38 to settle at $79.98. Cousins Properties Incorporated (NYSE:CUZ), on the other hand, is down -5.84% year to date as of 05/17/2018. It currently trades at $8.71 and has returned -5.53% during the past week.

Celgene Corporation (NASDAQ:CELG) and Cousins Properties Incorporated (NYSE:CUZ) are the two most active stocks in the Biotechnology industry based on today’s trading volumes. Investor interest in the two stocks is clearly very high, but which is the better investment? To answer this question, we will compare the two companies across growth, profitability, risk, and valuation metrics, and also examine their analyst ratings and insider activity trends.

Growth

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 CELG to grow earnings at a 20.44% annual rate over the next 5 years.

Profitability and Returns

A high growth rate isn’t necessarily valuable to investors. In fact, companies that overinvest in low return projects just to achieve a high growth rate can actually destroy shareholder value. Profitability and returns are a measure of the quality of a company’s business and its growth opportunities. We’ll use EBITDA margin and Return on Investment (ROI) to measure this., compared to an EBITDA margin of 18.18% for Cousins Properties Incorporated (CUZ).

Cash Flow



Cash is king when it comes to investing. CELG’s free cash flow (“FCF”) per share for the trailing twelve months was -0.54. Comparatively, CUZ’s free cash flow per share was -0.15. On a percent-of-sales basis, CELG’s free cash flow was -3.01% while CUZ converted -0.01% of its revenues into cash flow. This means that, for a given level of sales, CUZ is able to generate more free cash flow for investors.

Liquidity and Financial Risk

CELG’s debt-to-equity ratio is 3.92 versus a D/E of 0.39 for CUZ. CELG is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

CELG trades at a forward P/E of 7.76, a P/B of 11.57, and a P/S of 4.41, compared to a forward P/E of 79.18, a P/B of 1.32, and a P/S of 7.98 for CUZ. 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. CELG is currently priced at a -30.89% to its one-year price target of 115.73. Comparatively, CUZ is -9.65% relative to its price target of 9.64. This suggests that CELG 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. CELG has a beta of 1.45 and CUZ’s beta is 0.90. CUZ’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. CELG has a short ratio of 1.95 compared to a short interest of 4.26 for CUZ. This implies that the market is currently less bearish on the outlook for CELG.

Summary




Celgene Corporation (NASDAQ:CELG) beats Cousins Properties Incorporated (NYSE:CUZ) on a total of 8 of the 14 factors compared between the two stocks. CELG is growing fastly, is more profitable, generates a higher return on investment and higher liquidity. In terms of valuation, CELG is the cheaper of the two stocks on an earnings and sales basis, CELG is more undervalued relative to its price target. Finally, CELG has better sentiment signals based on short interest.

Previous ArticleNext Article

Related Post

Macy’s, Inc. (M) vs. ZTO Express (Cayman) In... Macy's, Inc. (NYSE:M) shares are up more than 15.72% this year and recently decreased -2.18% or -$0.65 to settle at $29.15. ZTO Express (Cayman) Inc. ...
Financially Devastating or Fantastic? – QUAL... The shares of QUALCOMM Incorporated have increased by more than 5.31% this year alone. The shares recently went down by -0.82% or -$0.56 and now trade...
A Side-by-side Analysis of Time Warner Inc. (TWX) ... Time Warner Inc. (NYSE:TWX) shares are up more than 5.70% this year and recently increased 0.35% or $0.34 to settle at $96.68. Spirit Realty Capital, ...
Choosing Between Host Hotels & Resorts, Inc. ... Host Hotels & Resorts, Inc. (NYSE:HST) shares are up more than 0.91% this year and recently decreased -0.45% or -$0.09 to settle at $20.03. Texas...
Understanding Technical Signals From The Macerich ... The Macerich Company (NYSE:MAC) gained 3.84% in yesterday’s session, going up from its prior closing price of $54.11 to $56.19, and has now recorded r...