Earnings

Financial Metrics You Should Care About: Zogenix, Inc. (ZGNX), Apollo Investment Corporation (AINV)

The shares of Zogenix, Inc. have decreased by more than -2.77% this year alone. The shares recently went down by -4.91% or -$2.01 and now trades at $38.94. The shares of Apollo Investment Corporation (NASDAQ:AINV), has slumped by -4.42% year to date as of 10/10/2018. The shares currently trade at $5.41 and have been able to report a change of -1.28% over the past one week.

The stock of Zogenix, Inc. and Apollo Investment Corporation were two of the most active stocks on Wednesday. Investors seem to be very interested in what happens to the stocks of these two companies but do investors favor one over the other? We will analyze the growth, profitability, risk, valuation, and insider trends of both companies and see which one investors prefer.

Next 5Y EPS Growth: 3.80% versus 3.00%

When a company is able to grow consistently in terms of earnings at a high compound rate have the highest likelihood of creating value for its shareholders over time. Analysts have predicted that ZGNX will grow it’s earning at a 3.80% annual rate in the next 5 years. This is in contrast to AINV which will have a positive growth at a 3.00% annual rate. This means that the higher growth rate of ZGNX implies a greater potential for capital appreciation over the years.

Profitability and Returns

Growth alone cannot be used to see if the company will be valuable. Shareholders will be the losers if a company invest in ventures that aren’t profitable enough to support upbeat growth. In order for us to accurately measure profitability and return, we will be using the EBITDA margin and Return on Investment (ROI), which balances the difference in capital structure. The ROI of ZGNX is -29.40% while that of AINV is 5.80%. These figures suggest that AINV ventures generate a higher ROI than that of ZGNX.

Liquidity and Financial Risk



The ability of a company to meet up with its short-term obligations and be able to clear its longer-term debts is measured using Liquidity and leverage ratios. The debt ratio of ZGNX is 0.00 compared to 0.79 for AINV. AINV can be able to settle its long-term debts and thus is a lower financial risk than ZGNX.

Valuation

ZGNX currently trades at a P/B of 4.92, while AINV trades at a forward P/E of 8.07, a P/B of 0.84, and a P/S of 4.53. This means that looking at the earnings, book values and sales basis, AINV is the cheaper one. It is very obvious that earnings are the most important factors to investors, thus analysts are most likely to place their bet on the P/E.

Analyst Price Targets and Opinions

The mistake some people make is that they think a cheap stock has more value to it. In order to know the value of a stock, there is need to compare its current price to its likely trading price in the future. The price of ZGNX is currently at a -50.46% to its one-year price target of 78.60. Looking at its rival pricing, AINV is at a -12.88% relative to its price target of 6.21.




When looking at the investment recommendation on say a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell), ZGNX is given a 1.50 while 2.50 placed for AINV. This means that analysts are more bullish on the outlook for AINV stocks.

Insider Activity and Investor Sentiment

Short interest or otherwise called the percentage of a stock’s tradable shares currently being shorted is another data that investors use to get a handle on sentiment. The short ratio for ZGNX is 6.99 while that of AINV is just 2.97. This means that analysts are more bullish on the forecast for AINV stock.

Conclusion

The stock of Apollo Investment Corporation defeats that of Zogenix, Inc. when the two are compared, with AINV taking 5 out of the total factors that were been considered. AINV happens to be more profitable, generates a higher ROI, has higher cash flow per share, higher liquidity and has a lower financial risk. When looking at the stock valuation, AINV is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for AINV is better on when it is viewed on short interest.

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