Depomed (NASDAQ: DEPO) and Merus Labs International (NASDAQ:MSLI) are both small-cap medical companies, but which is the superior investment? We will compare the two businesses based on the strength of their institutional ownership, dividends, earnings, risk, valuation, profitabiliy and analyst recommendations.

Earnings and Valuation

This table compares Depomed and Merus Labs International’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Depomed $441.56 million 1.49 $125.09 million ($1.53) -6.88
Merus Labs International $80.09 million 1.88 $31.89 million ($0.08) -16.00

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

Risk & Volatility

Depomed has a beta of 1.15, suggesting that its stock price is 15% more volatile than the S&P 500. Comparatively, Merus Labs International has a beta of 1.55, suggesting that its stock price is 55% more volatile than the S&P 500.

Insider & Institutional Ownership

92.3% of Depomed shares are owned by institutional investors. Comparatively, 19.7% of Merus Labs International shares are owned by institutional investors. 5.1% of Depomed shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Profitability

This table compares Depomed and Merus Labs International’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Depomed -21.41% -25.33% -5.52%
Merus Labs International -12.08% -6.58% -3.47%

Analyst Recommendations

This is a breakdown of current ratings for Depomed and Merus Labs International, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Depomed 0 4 4 0 2.50
Merus Labs International 0 6 0 0 2.00

Depomed currently has a consensus target price of $17.00, indicating a potential upside of 61.60%. Merus Labs International has a consensus target price of $1.35, indicating a potential upside of 5.47%. Given Depomed’s stronger consensus rating and higher possible upside, equities research analysts clearly believe Depomed is more favorable than Merus Labs International.

Summary

Depomed beats Merus Labs International on 7 of the 13 factors compared between the two stocks.

About Depomed

Depomed, Inc. is a specialty pharmaceutical company. The Company focuses on pain and other central nervous system (CNS) conditions. Its products include NUCYNTA ER (tapentadol extended release tablets), NUCYNTA IR (NUCYNTA) (tapentadol), Gralise (gabapentin), CAMBIA (diclofenac potassium for oral solution), Zipsor (diclofenac potassium) and Lazanda (fentanyl). Its NUCYNTA ER (tapentadol extended release tablets) is a product for the management of pain severe enough to require daily long term opioid treatment, including neuropathic pain associated with diabetic peripheral neuropathy in adults, and its NUCYNTA (tapentadol) is a product for the management of moderate to severe acute pain in adults. Its Gralise (gabapentin) is a once-daily product for the management of postherpetic neuralgia. Its CAMBIA (diclofenac potassium for oral solution) is a product for the acute treatment of migraine attacks.

About Merus Labs International

Merus Labs International Inc. is a specialty pharmaceutical company. The Company is engaged in the acquisition and licensing of branded prescription pharmaceutical products. The Company’s products include Elantan, Isoket, Deponit, Sintrom, Emselex/Enablex, Surgestone, Provames, Speciafoldine, Tredemine, Salagen, Estraderm MX and Vancocin. Elantan are tablets or capsules that belong to a group of medicines called organic nitrates. Isoket belongs to a group of medicines called organic nitrates. Deponit belongs to a group of medicines called nitrates. Sintrom is an anticoagulant indicated to treat and prevent thromboembolic diseases. Emselex/Enablex is used in adults to treat overactive bladder syndrome. Surgestone is used to treat women with menstrual irregularities due to ovulation disorder, dysmenorrhea and premenstrual syndrome. Provames is used as hormone replacement therapy in postmenopausal women with symptoms of estrogen deficiency.

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