Aralez Pharmaceuticals (NASDAQ: ARLZ) and Novartis AG (NYSE:NVS) are both medical companies, but which is the better business? We will compare the two companies based on the strength of their analyst recommendations, institutional ownership, profitability, valuation, risk, dividends and earnings.

Risk & Volatility

Aralez Pharmaceuticals has a beta of 1.34, meaning that its share price is 34% more volatile than the S&P 500. Comparatively, Novartis AG has a beta of 0.74, meaning that its share price is 26% less volatile than the S&P 500.

Institutional & Insider Ownership

23.9% of Aralez Pharmaceuticals shares are held by institutional investors. Comparatively, 11.0% of Novartis AG shares are held by institutional investors. 6.7% of Aralez Pharmaceuticals shares are held by insiders. Comparatively, 0.0% of Novartis AG shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of recent recommendations for Aralez Pharmaceuticals and Novartis AG, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Aralez Pharmaceuticals 0 0 3 0 3.00
Novartis AG 2 7 6 0 2.27

Aralez Pharmaceuticals presently has a consensus target price of $8.00, indicating a potential upside of 555.74%. Novartis AG has a consensus target price of $84.44, indicating a potential downside of 1.39%. Given Aralez Pharmaceuticals’ stronger consensus rating and higher probable upside, equities research analysts clearly believe Aralez Pharmaceuticals is more favorable than Novartis AG.

Profitability

This table compares Aralez Pharmaceuticals and Novartis AG’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Aralez Pharmaceuticals -122.35% -90.17% -22.15%
Novartis AG 13.52% 15.51% 8.41%

Dividends

Novartis AG pays an annual dividend of $2.30 per share and has a dividend yield of 2.7%. Aralez Pharmaceuticals does not pay a dividend. Novartis AG pays out 83.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Valuation and Earnings

This table compares Aralez Pharmaceuticals and Novartis AG’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Aralez Pharmaceuticals $87.22 million 0.94 -$55.02 million ($1.64) -0.74
Novartis AG $49.18 billion 4.56 $14.46 billion $2.74 31.25

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

Summary

Novartis AG beats Aralez Pharmaceuticals on 9 of the 15 factors compared between the two stocks.

Aralez Pharmaceuticals Company Profile

Aralez Pharmaceuticals Inc. is a Canada-based specialty pharmaceutical company. The Company focuses on acquiring, developing and commercializing products in cardiovascular, pain and other areas. The Company’s products include Fibricor, Cambia, Fiorinal, Fiorinal C, Soriatane, Bezalip SR, NeoVisc, Uracyst, Durela, Proferrin, Resultz and Collatamp G. Its development products include YOSPRALA and Bilastine. Fibricor (fenofibric acid) is indicated as a complementary therapy along with diet for the treatment of hypertriglyceridemia, and as a complementary therapy along with diet to reduce elevated low-density lipoprotein cholesterol (LDL-C), total cholesterol (Total-C), triglycerides (TG) and apolipoprotein B (Apo B). Fibricor is also used to increase high-density lipoprotein (HDL) cholesterol (HDL-C) in patients with hypercholesterolemia or mixed dyslipidemia. Cambia (diclofenac potassium for oral solution) is a non-steroidal anti-inflammatory drug (NSAID).

Novartis AG Company Profile

Novartis AG is a holding company, which provides healthcare solutions. The Company is engaged in the research, development, manufacturing and marketing of a range of healthcare products led by pharmaceuticals. The Company’s segments include Innovative Medicines, Sandoz, Alcon and Corporate activities. Innovative Medicines researches, develops, manufactures, distributes and sells patented prescription medicines to develop health outcomes for patients and healthcare providers. Sandoz develops, manufactures, distributes and sells prescription medicines, as well as pharmaceutical active substances that are not protected by valid and enforceable third-party patents. Alcon researches, develops, manufactures, distributes and sells eye care products. Alcon is a provider of eye care with product offerings in eye care devices and vision care. The Company’s range of products includes pharmaceuticals and oncology medicines, generic and biosimilar medicines, and eye care devices.

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