Coherus BioSciences, Inc. (NASDAQ:CHRS) shares are up more than 98.78% this year and recently decreased -1.91% or -$0.35 to settle at $17.99. American Axle & Manufacturing Holdings, Inc. (NYSE:AXL), on the other hand, is down -11.17% year to date as of 11/29/2019. It currently trades at $9.86 and has returned 3.90% during the past week.
Coherus BioSciences, Inc. (NASDAQ:CHRS) and American Axle & Manufacturing Holdings, Inc. (NYSE:AXL) 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.
The ability to grow earnings at a compound rate over time is a crucial determinant of investment value. Analysts expect CHRS to grow earnings at a 23.00% annual rate over the next 5 years. Comparatively, AXL is expected to grow at a -4.97% annual rate. All else equal, CHRS’s higher growth rate would imply a greater potential for capital appreciation.
Just, if not more, important than the growth rate is the quality of that growth. Growth can actual be harmful to investors if it comes at the cost of weak profitability and low returns. To adjust for differences in capital structure we’ll use EBITDA margin and Return on Investment (ROI) as measures of profitability and return., compared to an EBITDA margin of 3.68% for American Axle & Manufacturing Holdings, Inc. (AXL).Cash Flow
If there’s one thing investors care more about than earnings, it’s cash flow. CHRS’s free cash flow (“FCF”) per share for the trailing twelve months was +0.40. Comparatively, AXL’s free cash flow per share was +1.28.
Balance sheet risk is one of the biggest factors to consider before investing. CHRS has a current ratio of 3.30 compared to 1.80 for AXL. This means that CHRS can more easily cover its most immediate liabilities over the next twelve months. CHRS’s debt-to-equity ratio is 3.18 versus a D/E of 2.63 for AXL. CHRS is therefore the more solvent of the two companies, and has lower financial risk.Valuation
CHRS trades at a forward P/E of 7.63, a P/B of 22.49, and a P/S of 5.54, compared to a forward P/E of 4.55, a P/B of 0.79, and a P/S of 0.17 for AXL. CHRS is the expensive of the two stocks on an earnings, book value and sales basis. 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
When investing it’s crucial to distinguish between price and value. As Warren Buffet said, “price is what you pay, value is what you get”. CHRS is currently priced at a -44.29% to its one-year price target of 32.29. Comparatively, AXL is -26.42% relative to its price target of 13.40. This suggests that CHRS is the better investment over the next year.
Risk and Volatility
To gauge the market risk of a particular stock, investors use beta. Stocks with a beta above 1 are more volatile than the market as a whole. Conversely, a beta below 1 implies below average systematic risk. CHRS has a beta of 2.87 and AXL’s beta is 2.22. AXL’s shares are therefore the less volatile of the two stocks.Insider Activity and Investor Sentiment
The analysis of insider buying and selling trends can be extended to the aggregate level. Short interest, which represents the percentage of a stock’s tradable shares currently being shorted, captures what the market as a whole feels about a stock. CHRS has a short ratio of 8.04 compared to a short interest of 4.44 for AXL. This implies that the market is currently less bearish on the outlook for AXL.
American Axle & Manufacturing Holdings, Inc. (NYSE:AXL) beats Coherus BioSciences, Inc. (NASDAQ:CHRS) on a total of 8 of the 13 factors compared between the two stocks. AXL is growing fastly, has higher cash flow per share and has lower financial risk. In terms of valuation, AXL is the cheaper of the two stocks on an earnings, book value and sales basis, Finally, AXL has better sentiment signals based on short interest.