CRISPR Therapeutics AG (NASDAQ:CRSP) shares are up more than 136.09% this year and recently decreased -6.80% or -$4.92 to settle at $67.45. Seadrill Limited (NYSE:SDRL), on the other hand, is down -87.18% year to date as of 12/09/2019. It currently trades at $1.25 and has returned 13.64% during the past week.
CRISPR Therapeutics AG (NASDAQ:CRSP) and Seadrill Limited (NYSE:SDRL) 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.
Companies that can consistently grow earnings at a high compound rate usually have the greatest potential to create value for shareholders in the long-run. Comparatively, SDRL is expected to grow at a 31.10% annual rate. All else equal, SDRL’s higher growth rate would imply a greater potential for capital appreciation.
Cash is king when it comes to investing. CRSP’s free cash flow (“FCF”) per share for the trailing twelve months was +2.27. Comparatively, SDRL’s free cash flow per share was -0.26. On a percent-of-sales basis, CRSP’s free cash flow was 4.02% while SDRL converted -10.48% of its revenues into cash flow. This means that, for a given level of sales, CRSP is able to generate more free cash flow for investors.
CRSP trades at a P/B of 6.25, and a P/S of 18.61, compared to a P/B of 0.07, and a P/S of 0.11 for SDRL. 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
A cheap stock is not necessarily a value stock. Most of the time, a stock is cheap for good reason. A stock only has value if the current price is substantially below the price at which it should trade in the future. CRSP is currently priced at a -12.97% to its one-year price target of 77.50. Comparatively, SDRL is -84.99% relative to its price target of 8.33. This suggests that SDRL is the better investment over the next year.
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. CRSP has a short ratio of 6.21 compared to a short interest of 9.36 for SDRL. This implies that the market is currently less bearish on the outlook for CRSP.
Seadrill Limited (NYSE:SDRL) beats CRISPR Therapeutics AG (NASDAQ:CRSP) on a total of 7 of the 14 factors compared between the two stocks. SDRL has higher cash flow per share, generates a higher return on investment and has lower financial risk. In terms of valuation, SDRL is the cheaper of the two stocks on book value and sales basis, SDRL is more undervalued relative to its price target.