Lannett (NYSE: LCI) and Aceto (NASDAQ:ACET) are both small-cap healthcare companies, but which is the superior stock? We will compare the two businesses based on the strength of their earnings, risk, valuation, profitability, dividends, analyst recommendations and institutional ownership.

Dividends

Aceto pays an annual dividend of $0.26 per share and has a dividend yield of 2.5%. Lannett does not pay a dividend. Aceto pays out 123.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Earnings & Valuation

This table compares Lannett and Aceto’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Lannett $633.34 million 1.67 -$580,000.00 $1.12 25.04
Aceto $638.32 million 0.49 $11.37 million $0.21 49.48

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

Profitability

This table compares Lannett and Aceto’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Lannett 6.67% 18.23% 6.16%
Aceto 1.07% 10.18% 3.95%

Institutional and Insider Ownership

97.3% of Lannett shares are owned by institutional investors. Comparatively, 80.7% of Aceto shares are owned by institutional investors. 15.0% of Lannett shares are owned by insiders. Comparatively, 4.1% of Aceto shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Risk and Volatility

Lannett has a beta of 2.84, indicating that its share price is 184% more volatile than the S&P 500. Comparatively, Aceto has a beta of 1.38, indicating that its share price is 38% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Lannett and Aceto, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Lannett 0 3 2 0 2.40
Aceto 0 2 1 0 2.33

Lannett presently has a consensus price target of $21.50, suggesting a potential downside of 23.35%. Aceto has a consensus price target of $15.00, suggesting a potential upside of 44.37%. Given Aceto’s higher probable upside, analysts clearly believe Aceto is more favorable than Lannett.

Summary

Lannett beats Aceto on 12 of the 16 factors compared between the two stocks.

Lannett Company Profile

Lannett Company, Inc. develops, manufactures, markets and distributes generic versions of brand pharmaceutical products. The Company manufactures and/or distributes prescription products with the exception of a small portfolio of over-the-counter products manufactured by its subsidiary, Silarx Pharmaceuticals, Inc. As of June 30, 2016, the Company’s products included Acetazolamide Tablets; Butalbital, Acetaminophen and Caffeine Tablets; Butalbital, Aspirin and Caffeine Capsules; C-Topical Solution; Digoxin Tablets; Glycolax Rx; Isosorbide Mononitrate CR; Levothyroxine Sodium Tablets; Methylphenidate HCL CD; Methylphenidate ER; Nifedipine CR; Omeprazole DR; Oxbutynin ER; Pantoprazole DR; Pilocarpine HCl Tablets; Triamterene w/Hydrochlorothiazide Capsules, and Ursodiol Capsules. The Company has additional products under development, which are orally administered solid oral-dosage products (tablet/capsule) or oral solutions, nasal, topicals or parentarels, as well as other dosage forms.

Aceto Company Profile

Aceto Corporation (Aceto) is engaged in the marketing, sales and distribution of finished dosage form generic pharmaceuticals, nutraceutical products, pharmaceutical active ingredients and intermediates, specialty performance chemicals inclusive of agricultural intermediates and agricultural protection products. The Company’s business is organized along product lines into three segments: Human Health, Pharmaceutical Ingredients and Performance Chemicals. As of June 30, 2016, it distributed over 1,100 chemical compounds used primarily as finished products or raw materials in the agricultural, coatings and industrial chemical industries. The Human Health segment includes finished dosage form generic drugs and nutraceutical products. As of June 30, 2016, the Pharmaceutical Ingredients segment had two product groups: Active Pharmaceutical Ingredients and Pharmaceutical Intermediates. The Performance Chemicals segment includes specialty chemicals and agricultural protection products.

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