Tonix Pharmaceuticals Holding Corp. (TNXP) vs. Obalon Therapeutics, Inc. (OBLN): Which is the Better Investment?

Tonix Pharmaceuticals Holding Corp. (NASDAQ:TNXP) shares are down more than -94.86% this year and recently decreased -3.42% or -$0.04 to settle at $1.13. Obalon Therapeutics, Inc. (NASDAQ:OBLN), on the other hand, is down -91.21% year to date as of 11/29/2019. It currently trades at $1.82 and has returned 1.11% during the past week.

Tonix Pharmaceuticals Holding Corp. (NASDAQ:TNXP) and Obalon Therapeutics, Inc. (NASDAQ:OBLN) are the two most active stocks in the Biotechnology industry based on today’s trading volumes. The market is clearly enthusiastic about both these stocks, but which is the better investment? To answer this, we will compare the two companies based on the strength of their growth, profitability, risk, returns, valuation, analyst recommendations, and insider trends.

Cash Flow

The amount of free cash flow available to investors is ultimately what determines the value of a stock. TNXP’s free cash flow (“FCF”) per share for the trailing twelve months was -49.60. Comparatively, OBLN’s free cash flow per share was -0.64.

Liquidity and Financial Risk

Liquidity and leverage ratios are important because they reveal the financial health of a company. TNXP has a current ratio of 4.90 compared to 5.70 for OBLN. This means that OBLN can more easily cover its most immediate liabilities over the next twelve months. TNXP’s debt-to-equity ratio is 0.00 versus a D/E of 0.00 for OBLN. TNXP is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

TNXP trades at a P/B of 0.16, compared to a P/B of 0.55, and a P/S of 3.09 for OBLN. 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”. TNXP is currently priced at a -82.62% to its one-year price target of 6.50. Comparatively, OBLN is -87% relative to its price target of 14.00. This suggests that OBLN is the better investment over the next year.

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. TNXP has a short ratio of 0.96 compared to a short interest of 1.42 for OBLN. This implies that the market is currently less bearish on the outlook for TNXP.

Summary

Obalon Therapeutics, Inc. (NASDAQ:OBLN) beats Tonix Pharmaceuticals Holding Corp. (NASDAQ:TNXP) on a total of 6 of the 13 factors compared between the two stocks. OBLN generates a higher return on investment, higher liquidity and has lower financial risk. OBLN is more undervalued relative to its price target.