The shares of Red Hat, Inc. (NYSE:RHT) and ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) were among the active stocks of the last trading sessions. Red Hat, Inc. (NYSE:RHT) declined to -1.78% closing at the price of $122.78 whereas the shares of ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) soared 0.24% with the increase of 0.05 points closing at the price of $21.16. Red Hat, Inc. has currently decrease -21.5% in its stock over the period of 6-months while its rival ACADIA Pharmaceuticals Inc. added 10.79% in the previous 6-months.
Now we have to analyze the facts that if the stocks were worthy off investors’ money? The facts to analyze here are risks, profitability, returns and price trends.
Returns and Profitability
Profitability and returns are the main reason of investment, the investors are looking for profits that they get and return they should expect over the period of time.
The first and foremost return that is considered while making an investment is the ROI or Return on Investment. The ROI is the ratio between the profit against the cost of investment. Currently the ROI of Red Hat, Inc. (NYSE:RHT) is 16.9% while the ROI of ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) is -67%. Another figure that is to be considered while analyzing the profitability of a share is its EBITDA margin, RHT’s EBITDA Margin is 35.21 whereas ACAD’s is -9.63.
Both the profitability ratios suggest that Red Hat, Inc. (NYSE:RHT) is more suitable investment in terms of profitability and return.
EPS & Surprise Factor
Red Hat, Inc. (NYSE:RHT) reported $0.85/share EPS for the previous quarter where analysts were predicting an EPS to be $0.82/share Thus beating the analyst Estimates with a Surprise Factor of 3.7 Percent. While, ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) reported EPS of $-0.51/share in the last quarter. The analysts projected EPS of $-0.45/share depicting a Surprise of -13.3 Percent.
Taking a look at Earnings per Share, Red Hat, Inc. tends to be beating the analyst estimates more than ACADIA Pharmaceuticals Inc.. so RHT is more profitable than ACAD.
Technical Analysis of Red Hat, Inc. & ACADIA Pharmaceuticals Inc.
Moving average convergence divergence (MACD) shows that Red Hat, Inc. (NYSE:RHT) is on a PRICE RELATIVITY trend While ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) is on PRICE RELATIVITY trend. The trend for the past 10-days shows that the Red Hat, Inc. was in BEARISH territory and ACADIA Pharmaceuticals Inc. was in BULLISH territory.
RHT’s current statistics gauge that the stock candle is BEARISH with HIGH volatility. While ACAD’s candle is BULLISH with LOW.
EPS Growth Rate: RHT’s 16.3% versus ACAD’s 22.5%
Another shareholder value can be analyzed through the EPS growth rate; the next 5 years EPS growth rate is predicted by the analysts after the analyzing the previous trends. The next 5 year EPS growth rate of Red Hat, Inc. (NYSE:RHT) is predicted at 16.3% while ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) stands at 22.5%. These numbers suggest that ACAD is more suitable investment in terms of EPS growth rate.
Financial Risk and Liquidity Concerns
The current ratio and the debt ratio are the two ratios that show the investor how quickly the company is able to payout its debt and how quickly it can cover its obligations. The current ratio of RHT stands at 1.3 while ACAD is at 6.1 whereas the debt ratio of the prior is 0.52 while the debt ratio of the later is 0.
The values of the both ratios suggest that one is more liquid and other investment is more risk free.
While making an investment, another main factor to consider before investing is the analyst recommendation on the scale of 1 to 5 where 1 is strong buy, 2 is buy, 3 is hold, 4 is Sell and 5 is strong sell. Analyst recommend 2.4 for RHT and 2.1 for ACAD which means RHT has Hold rating whereas ACAD has Hold rating.
Another recommendation of analyst that is to be considered worthy is the price target. The mare price or price trend does not suggest the suitability of a stock. The price target set by analyst is also to be considered while investing as it suggests to what extent the stock will rise or fall in the near future. The price target set for RHT is $158.88 which is 22.72% of its current price while ACAD has price target of 31.56 which is 32.95% of its current price.
Valuation is the process of determining the company’s worth for an investor, the valuation ratios give an insight to that worthiness.
RHT currently has price to earning P/E ratio of 55.16 whereas ACAD has 0 while the forward P/E ratio for the prior stands at 30.86 and for the later it depicts the value of 0.
The price to Book P/B for RHT is 15.2, Price to Sale is at 6.96 and for ACAD these ratios stand at 9.98 and 14.31.