A Side-by-side Analysis of Callaway Golf Company (ELY) and Corbus Pharmaceuticals Holdings, Inc. (CRBP)

Callaway Golf Company (NYSE:ELY) shares are up more than 17.84% this year and recently decreased -4.25% or -$0.8 to settle at $18.03. Corbus Pharmaceuticals Holdings, Inc. (NASDAQ:CRBP), on the other hand, is up 2.74% year to date as of 08/12/2019. It currently trades at $6.00 and has returned 8.50% during the past week.

Callaway Golf Company (NYSE:ELY) and Corbus Pharmaceuticals Holdings, Inc. (NASDAQ:CRBP) are the two most active stocks in the Sporting Goods 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 ELY to grow earnings at a 30.90% annual rate over the next 5 years.

Profitability and Returns

Growth isn’t very attractive to investors if companies are sacrificing profitability and shareholder returns to achieve that growth. We will use EBITDA margin and Return on Investment (ROI), which control for differences in capital structure between the two companies, to measure profitability and return. Callaway Golf Company (ELY) has an EBITDA margin of 8.35%. This suggests that ELY underlying business is more profitable ELY’s ROI is 13.20% while CRBP has a ROI of -203.40%. The interpretation is that ELY’s business generates a higher return on investment than CRBP’s.

Cash Flow

Cash is king when it comes to investing. ELY’s free cash flow (“FCF”) per share for the trailing twelve months was +0.69. Comparatively, CRBP’s free cash flow per share was +0.17. On a percent-of-sales basis, ELY’s free cash flow was 5.22% while CRBP converted 0.23% of its revenues into cash flow. This means that, for a given level of sales, ELY is able to generate more free cash flow for investors.

Liquidity and Financial Risk

Liquidity and leverage ratios provide insight into the financial health of a company, and allow investors to determine the likelihood that the company will be able to continue operating as a going concern. ELY has a current ratio of 1.60 compared to 2.60 for CRBP. This means that CRBP can more easily cover its most immediate liabilities over the next twelve months. ELY’s debt-to-equity ratio is 0.93 versus a D/E of 0.00 for CRBP. ELY is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

ELY trades at a forward P/E of 14.90, a P/B of 2.30, and a P/S of 1.26, compared to a P/B of 8.22, and a P/S of 65.20 for CRBP. 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 isn’t a good investment if the stock is priced accurately. To get a sense of “value” we must compare the current price to some measure of intrinsic value such as a price target. ELY is currently priced at a -20.19% to its one-year price target of 22.59. Comparatively, CRBP is -76.66% relative to its price target of 25.71. This suggests that CRBP is the better investment over the next year.

Risk and Volatility

Analyst use beta to measure a stock’s volatility relative to the overall market. Stocks with a beta above 1 tend to have bigger swings in price than the market as a whole, the opposite being the case for stocks with a beta below 1. ELY has a beta of 1.27 and CRBP’s beta is 1.80. ELY’s shares are therefore the less volatile of the two stocks.

Insider Activity and Investor Sentiment

Comparing the number of shares sold short to the float is a method analysts often use to get a reading on investor sentiment. ELY has a short ratio of 7.05 compared to a short interest of 23.04 for CRBP. This implies that the market is currently less bearish on the outlook for ELY.

Summary

Callaway Golf Company (NYSE:ELY) beats Corbus Pharmaceuticals Holdings, Inc. (NASDAQ:CRBP) on a total of 9 of the 14 factors compared between the two stocks. ELY is growing fastly, is more profitable, generates a higher return on investment, has higher cash flow per share and has a higher cash conversion rate. In terms of valuation, ELY is the cheaper of the two stocks on book value and sales basis, Finally, ELY has better sentiment signals based on short interest.