Whiting Petroleum Corporation (NYSE:WLL) shares are down more than -67.96% this year and recently increased 3.27% or $0.23 to settle at $7.27. Clearside Biomedical, Inc. (NASDAQ:CLSD), on the other hand, is up 4.67% year to date as of 11/07/2019. It currently trades at $1.12 and has returned -11.11% during the past week.
Whiting Petroleum Corporation (NYSE:WLL) and Clearside Biomedical, Inc. (NASDAQ:CLSD) are the two most active stocks in the Oil & Gas Drilling & Exploration industry based on today’s trading volumes. Investors are clearly interested in the two names, but is one a better choice than the other? We will compare the two companies across growth, profitability, risk, valuation, and insider trends to answer this question.
Growth in and of itself is not necessarily valuable, and it can even be harmful to shareholders if companies overinvest in unprofitable projects in pursuit of that growth. We will use EBITDA margin and Return on Investment (ROI), which adjust for differences in capital structure, as measure of profitability and return. Whiting Petroleum Corporation (WLL) has an EBITDA margin of 68.45%. This suggests that WLL underlying business is more profitable
If there’s one thing investors care more about than earnings, it’s cash flow. WLL’s free cash flow (“FCF”) per share for the trailing twelve months was -0.10. Comparatively, CLSD’s free cash flow per share was -0.27. On a percent-of-sales basis, WLL’s free cash flow was -0.44% while CLSD converted -34.18% of its revenues into cash flow. This means that, for a given level of sales, WLL is able to generate more free cash flow for investors.Liquidity and Financial Risk
Liquidity and leverage ratios are important because they reveal the financial health of a company. WLL has a current ratio of 0.30 compared to 3.50 for CLSD. This means that CLSD can more easily cover its most immediate liabilities over the next twelve months. WLL’s debt-to-equity ratio is 0.68 versus a D/E of 0.78 for CLSD. CLSD is therefore the more solvent of the two companies, and has lower financial risk.
WLL trades at a forward P/E of 63.22, a P/B of 0.16, and a P/S of 0.36, compared to a P/B of 3.29, and a P/S of 419.78 for CLSD. 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
Just because a stock is cheaper doesn’t mean there’s more value to be had. In order to assess value we need to compare the current price to where it’s likely to trade in the future. WLL is currently priced at a -55.26% to its one-year price target of 16.25. Comparatively, CLSD is -62.67% relative to its price target of 3.00. This suggests that CLSD is the better investment over the next year.
Risk and Volatility
Beta is a metric that investors frequently use to analyze a stock’s systematic risk. A beta above 1 implies above average market volatility. Conversely, a stock with a beta below 1 is seen as less risky than the overall market. WLL has a beta of 3.20 and CLSD’s beta is -0.29. CLSD’s shares are therefore the less volatile of the two stocks.Insider Activity and Investor Sentiment
Short interest is another tool that analysts use to gauge investor sentiment. It represents the percentage of a stock’s tradable shares that are being shorted. WLL has a short ratio of 2.80 compared to a short interest of 1.24 for CLSD. This implies that the market is currently less bearish on the outlook for CLSD.
Whiting Petroleum Corporation (NYSE:WLL) beats Clearside Biomedical, Inc. (NASDAQ:CLSD) on a total of 7 of the 14 factors compared between the two stocks. WLL is more profitable, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate and has lower financial risk. In terms of valuation, WLL is the cheaper of the two stocks on book value and sales basis,