ZIOPHARM Oncology, Inc. (ZIOP) vs. Huntsman Corporation (HUN): Breaking Down the Biotechnology Industrys Two Hottest Stocks – E Globalist

ZIOPHARM Oncology, Inc. (NASDAQ:ZIOP) shares are up more than 181.82% this year and recently decreased -1.50% or -$0.08 to settle at $5.27. Huntsman Corporation (NYSE:HUN), on the other hand, is up 20.27% year to date as of 11/27/2019. It currently trades at $23.20 and has returned 2.11% during the past week.

ZIOPHARM Oncology, Inc. (NASDAQ:ZIOP) and Huntsman Corporation (NYSE:HUN) are the two most active stocks in the Biotechnology industry based on todays trading volumes. Investor interest in the two stocks is clearly very high, but which is the better investment? To answer this question, we will compare the two companies across growth, profitability, risk, and valuation metrics, and also examine their analyst ratings and insider activity trends.

Companies that can increase earnings at a high compound rate over time are attractive to investors. Comparatively, HUN is expected to grow at a 0.70% annual rate. All else equal, HUNs higher growth rate would imply a greater potential for capital appreciation.

Just, if not more, important than the growth rate is the quality of that growth. Growth can actual be harmful to investors if it comes at the cost of weak profitability and low returns. To adjust for differences in capital structure well use EBITDA margin and Return on Investment (ROI) as measures of profitability and return. EBITDA margin of 8.49% for Huntsman Corporation (HUN). ZIOPs ROI is -63.00% while HUN has a ROI of 20.20%. The interpretation is that HUNs business generates a higher return on investment than ZIOPs.

The amount of free cash flow available to investors is ultimately what determines the value of a stock. ZIOPs free cash flow (FCF) per share for the trailing twelve months was -0.06. Comparatively, HUNs free cash flow per share was +1.32. On a percent-of-sales basis, ZIOPs free cash flow was -7.23% while HUN converted 3.23% of its revenues into cash flow. This means that, for a given level of sales, HUN is able to generate more free cash flow for investors.

Liquidity and leverage ratios are important because they reveal the financial health of a company. ZIOP has a current ratio of 10.30 compared to 2.00 for HUN. This means that ZIOP can more easily cover its most immediate liabilities over the next twelve months. ZIOPs debt-to-equity ratio is 0.00 versus a D/E of 0.95 for HUN. HUN is therefore the more solvent of the two companies, and has lower financial risk.

ZIOP trades at a P/B of 8.50, compared to a forward P/E of 11.68, a P/B of 2.15, and a P/S of 0.70 for HUN. Given that earnings are what matter most to investors, analysts tend to place a greater weight on the P/E.

Analyst Price Targets and Opinions

Investors often compare a stocks current price to an analyst price target to get a sense of the potential upside within the next year. ZIOP is currently priced at a -16.35% to its one-year price target of 6.30. Comparatively, HUN is -12.05% relative to its price target of 26.38. This suggests that ZIOP is the better investment over the next year.

Risk and Volatility

To gauge the market risk of a particular stock, investors use beta. Stocks with a beta above 1 are more volatile than the market as a whole. Conversely, a beta below 1 implies below average systematic risk. ZIOP has a beta of 2.53 and HUNs beta is 2.34. HUNs shares are therefore the less volatile of the two stocks.

Analysts often look at short interest, or the percentage of a companys float currently being shorted by investors, to aid in their outlook for a particular stock. ZIOP has a short ratio of 34.54 compared to a short interest of 1.41 for HUN. This implies that the market is currently less bearish on the outlook for HUN.

Huntsman Corporation (NYSE:HUN) beats ZIOPHARM Oncology, Inc. (NASDAQ:ZIOP) on a total of 9 of the 14 factors compared between the two stocks. HUN higher liquidity, is more profitable, generates a higher return on investment, has higher cash flow per share and has a higher cash conversion rate. Finally, HUN has better sentiment signals based on short interest.

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ZIOPHARM Oncology, Inc. (ZIOP) vs. Huntsman Corporation (HUN): Breaking Down the Biotechnology Industrys Two Hottest Stocks - E Globalist