Arrowhead Pharmaceuticals (NASDAQ: ARWR) and Aldeyra Therapeutics (NASDAQ:ALDX) are both small-cap medical companies, but which is the superior investment? We will compare the two companies based on the strength of their valuation, risk, dividends, analyst recommendations, institutional ownership, profitability and earnings.

Profitability

This table compares Arrowhead Pharmaceuticals and Aldeyra Therapeutics’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Arrowhead Pharmaceuticals -201.84% -46.73% -34.08%
Aldeyra Therapeutics N/A -82.96% -73.43%

Risk & Volatility

Arrowhead Pharmaceuticals has a beta of 1.85, suggesting that its share price is 85% more volatile than the S&P 500. Comparatively, Aldeyra Therapeutics has a beta of 0.3, suggesting that its share price is 70% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent recommendations and price targets for Arrowhead Pharmaceuticals and Aldeyra Therapeutics, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Arrowhead Pharmaceuticals 0 5 0 0 2.00
Aldeyra Therapeutics 0 0 4 0 3.00

Arrowhead Pharmaceuticals presently has a consensus price target of $1.80, indicating a potential downside of 6.25%. Aldeyra Therapeutics has a consensus price target of $16.50, indicating a potential upside of 288.24%. Given Aldeyra Therapeutics’ stronger consensus rating and higher possible upside, analysts plainly believe Aldeyra Therapeutics is more favorable than Arrowhead Pharmaceuticals.

Valuation & Earnings

This table compares Arrowhead Pharmaceuticals and Aldeyra Therapeutics’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Arrowhead Pharmaceuticals $22.73 million 6.32 -$47.97 million ($0.66) -2.91
Aldeyra Therapeutics N/A N/A -$19.82 million ($1.46) -2.91

Aldeyra Therapeutics has higher revenue, but lower earnings than Arrowhead Pharmaceuticals. Aldeyra Therapeutics is trading at a lower price-to-earnings ratio than Arrowhead Pharmaceuticals, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

29.9% of Arrowhead Pharmaceuticals shares are owned by institutional investors. Comparatively, 58.2% of Aldeyra Therapeutics shares are owned by institutional investors. 4.6% of Arrowhead Pharmaceuticals shares are owned by company insiders. Comparatively, 28.4% of Aldeyra Therapeutics shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Summary

Aldeyra Therapeutics beats Arrowhead Pharmaceuticals on 7 of the 12 factors compared between the two stocks.

Arrowhead Pharmaceuticals Company Profile

Arrowhead Pharmaceuticals, Inc., formerly Arrowhead Research Corporation, develops medicines that treat intractable diseases by silencing the genes that cause them. Using a portfolio of ribonucleic acid (RNA) chemistries and modes of delivery, the Company’s therapies trigger the RNA interference mechanism to induce knockdown of target genes. The Company is focused on developing drugs for diseases with a genetic basis, characterized by the overproduction of one or more proteins. The Company’s preclinical pipeline of RNA interference (RNAi) therapeutics includes both subcutaneously administered liver-targeted candidates and extra-hepatic candidates. The Company’s pre-clinical-stage drug candidates include ARO-HBV, ARO-AAT, ARO-LPA, ARO-AMG1, ARO-F12 and ARO-HIF2. ARO-HBV is an RNAi therapeutic candidate for the treatment of chronic hepatitis B infection. ARO-AAT is a therapeutic candidate for the treatment of liver disease associated with Alpha-1 Antitrypsin Deficiency.

Aldeyra Therapeutics Company Profile

Aldeyra Therapeutics, Inc., formerly Aldexa Therapeutics, Inc., is a biotechnology company. The Company’s principal activities include raising capital and research and development activities. The Company’s segment is the identification and development of a treatment for diseases related to high levels of aldehydes. The Company is focused on the development of products for diseases caused by inflammation and inborn errors of metabolism that are caused by naturally occurring toxic and pro-inflammatory chemical species known as aldehydes. The Company has developed a series of aldehyde traps, molecules that are designed to sequester and allow for the degradation of aldehydes. The Company’s aldehyde trap, NS2, is a product candidate that is under development for the treatment of allergic conjunctivitis and related rare allergic ocular diseases, noninfectious anterior uveitis, sjogren-larsson syndrome (SLS) and succinic semi-aldehyde dehydrogenase deficiency.

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