Reata Pharmaceuticals (NASDAQ: RETA) and Achaogen (NASDAQ:AKAO) are both small-cap medical companies, but which is the superior investment? We will compare the two companies based on the strength of their valuation, dividends, institutional ownership, profitability, earnings, analyst recommendations and risk.

Volatility and Risk

Reata Pharmaceuticals has a beta of -2.17, indicating that its share price is 317% less volatile than the S&P 500. Comparatively, Achaogen has a beta of 1.54, indicating that its share price is 54% more volatile than the S&P 500.

Insider and Institutional Ownership

15.6% of Reata Pharmaceuticals shares are held by institutional investors. Comparatively, 84.2% of Achaogen shares are held by institutional investors. 62.4% of Reata Pharmaceuticals shares are held by insiders. Comparatively, 8.4% of Achaogen shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Profitability

This table compares Reata Pharmaceuticals and Achaogen’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Reata Pharmaceuticals -46.89% N/A -27.08%
Achaogen -281.88% -86.24% -51.32%

Analyst Recommendations

This is a summary of recent recommendations for Reata Pharmaceuticals and Achaogen, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Reata Pharmaceuticals 0 0 8 0 3.00
Achaogen 0 1 8 0 2.89

Reata Pharmaceuticals presently has a consensus price target of $54.71, indicating a potential upside of 73.31%. Achaogen has a consensus price target of $28.13, indicating a potential upside of 100.18%. Given Achaogen’s higher probable upside, analysts plainly believe Achaogen is more favorable than Reata Pharmaceuticals.

Earnings and Valuation

This table compares Reata Pharmaceuticals and Achaogen’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Reata Pharmaceuticals $50.09 million 16.45 -$22.97 million ($1.07) -29.50
Achaogen $35.51 million 16.71 -$68.05 million ($3.16) -4.45

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

Summary

Reata Pharmaceuticals beats Achaogen on 8 of the 12 factors compared between the two stocks.

About Reata Pharmaceuticals

Reata Pharmaceuticals, Inc. is a clinical-stage biopharmaceutical company. The Company is focused on identifying, developing and commercializing product candidates that modulate the activity of regulatory proteins involved in the biology of mitochondrial function, oxidative stress, and inflammation to address the unmet medical needs of patients with a range of serious or life-threatening diseases. The Company’s lead product candidates include bardoxolone methyl, which is being studied in Phase III trial for the treatment of pulmonary arterial hypertension (PAH), associated with connective tissue disease (CTD-PAH), as well as a Phase II trial for the treatment of pulmonary hypertension due to interstitial lung disease (PH-ILD), and PAH, each of which are subsets of pulmonary hypertension (PH), Omaveloxolone, which is in Phase II clinical development for the treatment of multiple diseases, including Friedreich’s ataxia, mitochondrial myopathies and metastatic melanoma.

About Achaogen

Achaogen, Inc. is a late-stage biopharmaceutical company. The Company is engaged in the discovery, development and commercialization of antibacterial treatments against multi-drug resistant (MDR) gram-negative infections. The Company is involved in researching and developing plazomicin, its lead product candidate, for the treatment of serious bacterial infections, including complicated urinary tract infection (cUTI), blood stream infections and other infections due to MDR Enterobacteriaceae, including carbapenem-resistant Enterobacteriaceae (CRE). Plazomicin is an intravenous aminoglycoside antibiotic. The Company has developed plazomicin by chemically modifying sisomicin, a naturally occurring aminoglycoside, in order to overcome common aminoglycoside resistance mechanisms. The Company has a portfolio of small molecule and antibody programs. The Company’s Early Development programs include C-Scape and LpxC.

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