EDAP TMS (NASDAQ: EDAP) and EnteroMedics (NASDAQ:ETRM) are both small-cap medical companies, but which is the better investment? We will compare the two businesses based on the strength of their risk, dividends, valuation, analyst recommendations, institutional ownership, profitability and earnings.

Earnings and Valuation

This table compares EDAP TMS and EnteroMedics’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
EDAP TMS $44.00 million 2.07 $270,377.00 ($0.01) -313.69
EnteroMedics $571,759.00 29.74 -$22.15 million ($16.72) -0.12

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

Profitability

This table compares EDAP TMS and EnteroMedics’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
EDAP TMS -0.27% 10.31% 5.56%
EnteroMedics -4,399.48% -167.73% -123.00%

Risk & Volatility

EDAP TMS has a beta of 1.02, meaning that its share price is 2% more volatile than the S&P 500. Comparatively, EnteroMedics has a beta of 3.07, meaning that its share price is 207% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current recommendations for EDAP TMS and EnteroMedics, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
EDAP TMS 0 0 1 0 3.00
EnteroMedics 0 0 1 0 3.00

EDAP TMS presently has a consensus target price of $6.50, indicating a potential upside of 107.01%. EnteroMedics has a consensus target price of $11.03, indicating a potential upside of 438.05%. Given EnteroMedics’ higher probable upside, analysts plainly believe EnteroMedics is more favorable than EDAP TMS.

Institutional and Insider Ownership

9.4% of EDAP TMS shares are held by institutional investors. Comparatively, 0.9% of EnteroMedics shares are held by institutional investors. 32.5% of EnteroMedics shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Summary

EDAP TMS beats EnteroMedics on 7 of the 11 factors compared between the two stocks.

About EDAP TMS

EDAP TMS S.A. (EDAP) is a holding company engaged in developing and marketing the Ablatherm and Focal One devices. The Company operates two divisions: High Intensity Focused Ultrasound (HIFU) and Urology Devices and Services (UDS) (including lithotripsy activities). The Company is developing HIFU technology for the treatment of certain other types of tumors. The Company also produces and commercializes medical equipment for treatment of urinary tract stones using extra-corporeal shockwave lithotripsy (ESWL) and distributes other types of urology devices in certain countries. The HIFU division is engaged in the development, manufacturing and marketing of medical devices based on HIFU technology for the invasive treatment of urological and other clinical indications. The UDS division is engaged in the development, marketing, manufacturing and servicing of medical devices for the invasive diagnosis or treatment of urological disorders, urinary stones, and other clinical indications.

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.

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