EnteroMedics (NASDAQ: ETRM) and BIOLASE (NASDAQ:BIOL) are both small-cap healthcare companies, but which is the superior investment? We will contrast the two companies based on the strength of their dividends, valuation, analyst recommendations, risk, institutional ownership, profitabiliy and earnings.

Earnings & Valuation

This table compares EnteroMedics and BIOLASE’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
EnteroMedics $754,700.00 46.58 -$22.17 million ($178.32) -0.03
BIOLASE $51.67 million 1.51 -$13.60 million ($0.25) -4.62

BIOLASE has higher revenue and earnings than EnteroMedics. BIOLASE is trading at a lower price-to-earnings ratio than EnteroMedics, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

34.2% of BIOLASE shares are owned by institutional investors. 1.4% of EnteroMedics shares are owned by insiders. Comparatively, 7.3% of BIOLASE shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Profitability

This table compares EnteroMedics and BIOLASE’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
EnteroMedics -18,398.63% -282.97% -205.55%
BIOLASE -37.78% -81.51% -41.72%

Risk & Volatility

EnteroMedics has a beta of 2.21, suggesting that its stock price is 121% more volatile than the S&P 500. Comparatively, BIOLASE has a beta of 1.89, suggesting that its stock price is 89% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current recommendations and price targets for EnteroMedics and BIOLASE, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
EnteroMedics 0 1 1 0 2.50
BIOLASE 0 0 1 0 3.00

EnteroMedics presently has a consensus target price of $8.35, suggesting a potential upside of 64.11%. BIOLASE has a consensus target price of $2.50, suggesting a potential upside of 116.45%. Given BIOLASE’s stronger consensus rating and higher possible upside, analysts plainly believe BIOLASE is more favorable than EnteroMedics.

Summary

BIOLASE beats EnteroMedics on 10 of the 12 factors compared between the two stocks.

About EnteroMedics

EnteroMedics Inc. (EnteroMedics) is a medical device company. The Company is focused on the design and development of devices that use neuroblocking technology to treat obesity, metabolic diseases and other gastrointestinal disorders. The Company’s neuroblocking technology, which is referred to as VBLOC therapy, is designed to intermittently block the vagus nerve. The Company’s initial product is the Maestro Rechargeable System, which uses VBLOC therapy to limit the expansion of the stomach, help control hunger sensations between meals, reduce the frequency and intensity of stomach contractions and produce a feeling of early and prolonged fullness. The Company’s VBLOC therapy is designed to block the gastrointestinal effects of the vagus nerve by replicating a vagotomy using high-frequency, low-energy electrical impulses to intermittently interrupt naturally occurring neural impulses on the vagus nerve between the brain and the digestive system.

About BIOLASE

BIOLASE, Inc. (BIOLASE) is a medical device company that develops, manufactures, markets and sells laser systems in dentistry and medicine. The Company markets, sells, and distributes dental imaging equipment, including cone beam digital x-rays and computer-aided design (CAD)/computer-aided manufacturing (CAM) intra-oral scanners, in-office, chair-side milling machines and three-dimensional (3-D) printers. It offers two categories of laser system products: WaterLase (all-tissue) systems and Diode (soft tissue) systems. Its brand, WaterLase, uses a combination of water and laser energy to perform procedures performed using drills, scalpels, and other traditional dental instruments for cutting soft and hard tissue. It also offers its Diode laser systems to perform soft tissue, pain therapy, and cosmetic procedures, including teeth whitening. Its Waterlase and Diode systems use disposable laser tips of differing sizes and shapes depending on the procedures being performed.

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