Arena Pharmaceuticals (NASDAQ: ARNA) and INC Research Holdings (NASDAQ:INCR) are both medical companies, but which is the superior investment? We will compare the two companies based on the strength of their valuation, institutional ownership, dividends, analyst recommendations, profitability, risk and earnings.

Valuation & Earnings

This table compares Arena Pharmaceuticals and INC Research Holdings’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Arena Pharmaceuticals $117.73 million 6.84 $16.71 million ($0.57) -36.02
INC Research Holdings $1.03 billion 2.95 $226.74 million $1.61 34.78

INC Research Holdings has higher revenue and earnings than Arena Pharmaceuticals. Arena Pharmaceuticals is trading at a lower price-to-earnings ratio than INC Research Holdings, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of recent ratings and target prices for Arena Pharmaceuticals and INC Research Holdings, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Arena Pharmaceuticals 0 2 5 0 2.71
INC Research Holdings 0 4 4 0 2.50

Arena Pharmaceuticals presently has a consensus target price of $38.83, suggesting a potential upside of 89.15%. INC Research Holdings has a consensus target price of $64.58, suggesting a potential upside of 15.33%. Given Arena Pharmaceuticals’ stronger consensus rating and higher possible upside, research analysts clearly believe Arena Pharmaceuticals is more favorable than INC Research Holdings.

Insider and Institutional Ownership

99.8% of INC Research Holdings shares are held by institutional investors. 1.9% of Arena Pharmaceuticals shares are held by company insiders. Comparatively, 0.2% of INC Research Holdings shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Risk and Volatility

Arena Pharmaceuticals has a beta of 1.39, meaning that its stock price is 39% more volatile than the S&P 500. Comparatively, INC Research Holdings has a beta of 1.42, meaning that its stock price is 42% more volatile than the S&P 500.

Profitability

This table compares Arena Pharmaceuticals and INC Research Holdings’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Arena Pharmaceuticals -16.27% -49.87% -10.82%
INC Research Holdings 5.69% 40.69% 9.87%

Summary

INC Research Holdings beats Arena Pharmaceuticals on 8 of the 13 factors compared between the two stocks.

Arena Pharmaceuticals Company Profile

Arena Pharmaceuticals, Inc. is a biopharmaceutical company. The Company is focused on developing small molecule drugs across a range of therapeutic areas. The Company has three primary investigational clinical programs: etrasimod (APD334) in Phase II evaluation for ulcerative colitis, APD371 entering Phase II evaluation for the treatment of pain associated with Crohn’s disease, and ralinepag (APD811) in Phase II evaluation for pulmonary arterial hypertension (PAH). The Company’s drug, Lorcaserin, is approved for marketing in the United States and South Korea for the indication of weight management. The Company’s drug candidates in clinical development include APD334 for autoimmune diseases, ralinepag for vascular diseases and APD371 for pain. The Company’s programs under collaboration include nelotanserin for dementia-associated psychosis, temanogrel for thrombotic diseases, and an undisclosed orphan GPCR for central nervous system (CNS) indication(s).

INC Research Holdings Company Profile

INC Research Holdings, Inc. is a global contract research organization (CRO). The Company focuses on Phase I to Phase IV clinical development services for the biopharmaceutical and medical device industries. The Company operates through two segments: Clinical Development Services and Phase I Services. The Company’s Clinical Development Services segment offers a range of clinical development services, including full-service global studies, as well as ancillary services, such as clinical monitoring, investigator recruitment, patient recruitment, data management, study reports to assist customers with their drug development process, quality assurance audits and specialized consulting services. The Phase I Services segment focuses on clinical development services for Phase I trials, which include scientific exploratory medicine, first-in-human studies through proof-of-concept stages and support for Phase I studies in established compounds.

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