Analyzing Reliable Long-term Trend For GNC Holdings, Inc. (GNC), BioDelivery Sciences International, Inc. (BDSI)

The shares of GNC Holdings, Inc. have decreased by more than -26.58% this year alone. The shares recently went down by -4.40% or -$0.08 and now trades at $1.74. The shares of BioDelivery Sciences International, Inc. (NASDAQ:BDSI), has jumped by 18.92% year to date as of 08/13/2019. The shares currently trade at $4.40 and have been able to report a change of 16.71% over the past one week.

The stock of GNC Holdings, Inc. and BioDelivery Sciences International, Inc. were two of the most active stocks on Tuesday. 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.

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. GNC has an EBITDA margin of 10.59%, this implies that the underlying business of GNC is more profitable. The ROI of GNC is 18.60% while that of BDSI is -29.10%. These figures suggest that GNC ventures generate a higher ROI than that of BDSI.

Cash Flow

The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, GNC’s free cash flow per share is a positive 0.29.

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 current ratio for GNC is 1.70 and that of BDSI is 2.90. This implies that it is easier for GNC to cover its immediate obligations over the next 12 months than BDSI.

Valuation

GNC currently trades at a forward P/E of 5.07, and a P/S of 0.07 while BDSI trades at a forward P/E of 16.99, a P/B of 11.28, and a P/S of 5.69. This means that looking at the earnings, book values and sales basis, GNC 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 GNC is currently at a -50.29% to its one-year price target of 3.50. Looking at its rival pricing, BDSI is at a -38.97% relative to its price target of 7.21.

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), GNC is given a 2.30 while 1.60 placed for BDSI. This means that analysts are more bullish on the outlook for GNC 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 GNC is 18.24 while that of BDSI is just 3.98. This means that analysts are more bullish on the forecast for BDSI stock.

Conclusion

The stock of BioDelivery Sciences International, Inc. defeats that of GNC Holdings, Inc. when the two are compared, with BDSI taking 5 out of the total factors that were been considered. BDSI 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, BDSI is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for BDSI is better on when it is viewed on short interest.