Analyzing Fundamentals and Technical: Arrowhead Pharmaceuticals, Inc. (ARWR), Paylocity Holding Corporation (PCTY)

The shares of Arrowhead Pharmaceuticals, Inc. have increased by more than 409.90% this year alone. The shares recently went down by -13.26% or -$9.68 and now trades at $63.33. The shares of Paylocity Holding Corporation (NASDAQ:PCTY), has jumped by 95.45% year to date as of 12/02/2019. The shares currently trade at $117.68 and have been able to report a change of 2.62% over the past one week.

The stock of Arrowhead Pharmaceuticals, Inc. and Paylocity Holding Corporation were two of the most active stocks on Monday. 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.

Next 5Y EPS Growth: 7.33% versus 22.10%

When a company is able to grow consistently in terms of earnings at a high compound rate have the highest likelihood of creating value for its shareholders over time. Analysts have predicted that ARWR will grow it’s earning at a 7.33% annual rate in the next 5 years. This is in contrast to PCTY which will have a positive growth at a 22.10% annual rate. This means that the higher growth rate of PCTY implies a greater potential for capital appreciation over the years.

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. ARWR has an EBITDA margin of 47.13%, this implies that the underlying business of ARWR is more profitable. The ROI of ARWR is 24.90% while that of PCTY is 16.90%. These figures suggest that ARWR ventures generate a higher ROI than that of PCTY.

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, ARWR’s free cash flow per share is a positive 0.04.

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 ARWR is 2.70 and that of PCTY is 1.10. This implies that it is easier for ARWR to cover its immediate obligations over the next 12 months than PCTY. The debt ratio of ARWR is 0.00 compared to 0.00 for PCTY. PCTY can be able to settle its long-term debts and thus is a lower financial risk than ARWR.


ARWR currently trades at a P/B of 24.64, and a P/S of 35.77 while PCTY trades at a forward P/E of 54.94, a P/B of 20.25, and a P/S of 12.59. This means that looking at the earnings, book values and sales basis, PCTY 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 ARWR is currently at a 5.04% to its one-year price target of 60.29. Looking at its rival pricing, PCTY is at a 1.23% relative to its price target of 116.25.

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), ARWR is given a 1.80 while 2.10 placed for PCTY. This means that analysts are more bullish on the outlook for PCTY 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 ARWR is 8.69 while that of PCTY is just 3.35. This means that analysts are more bullish on the forecast for PCTY stock.


The stock of Arrowhead Pharmaceuticals, Inc. defeats that of Paylocity Holding Corporation when the two are compared, with ARWR taking 7 out of the total factors that were been considered. ARWR 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, ARWR is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for ARWR is better on when it is viewed on short interest.