Diplomat Pharmacy (NYSE: DPLO) and American Renal Associates (NYSE:ARA) are both small-cap healthcare companies, but which is the superior stock? We will contrast the two companies based on the strength of their earnings, profitability, analyst recommendations, dividends, risk, valuation and institutional ownership.

Analyst Recommendations

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This is a breakdown of recent recommendations for Diplomat Pharmacy and American Renal Associates, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Diplomat Pharmacy 0 6 5 0 2.45
American Renal Associates 0 1 2 0 2.67

Diplomat Pharmacy presently has a consensus price target of $25.50, suggesting a potential upside of 13.79%. American Renal Associates has a consensus price target of $23.50, suggesting a potential upside of 5.24%. Given Diplomat Pharmacy’s higher possible upside, research analysts plainly believe Diplomat Pharmacy is more favorable than American Renal Associates.

Risk and Volatility

Diplomat Pharmacy has a beta of 1.32, indicating that its share price is 32% more volatile than the S&P 500. Comparatively, American Renal Associates has a beta of 2.08, indicating that its share price is 108% more volatile than the S&P 500.

Profitability

This table compares Diplomat Pharmacy and American Renal Associates’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Diplomat Pharmacy 0.35% 8.89% 4.47%
American Renal Associates -1.00% 14.51% 2.06%

Insider and Institutional Ownership

64.5% of Diplomat Pharmacy shares are held by institutional investors. Comparatively, 91.6% of American Renal Associates shares are held by institutional investors. 30.2% of Diplomat Pharmacy shares are held by insiders. Comparatively, 12.6% of American Renal Associates shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Valuation & Earnings

This table compares Diplomat Pharmacy and American Renal Associates’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Diplomat Pharmacy $4.49 billion 0.37 $15.51 million $0.34 65.91
American Renal Associates $745.11 million 0.94 -$380,000.00 ($0.26) -85.88

Diplomat Pharmacy has higher revenue and earnings than American Renal Associates. American Renal Associates is trading at a lower price-to-earnings ratio than Diplomat Pharmacy, indicating that it is currently the more affordable of the two stocks.

Summary

Diplomat Pharmacy beats American Renal Associates on 9 of the 14 factors compared between the two stocks.

Diplomat Pharmacy Company Profile

Diplomat Pharmacy, Inc. (Diplomat) operates a specialty pharmacy business, which stocks, dispenses and distributes prescriptions for various biotechnology and specialty pharmaceutical manufacturers. The Company operates through specialty pharmacy services segment. The Company’s primary focus is on medication management programs for individuals with chronic diseases, including oncology, immunology, hepatitis, multiple sclerosis, specialty infusion therapy, and various other serious and/or long-term conditions. The Company provides specialty pharmacy support services to a national network of retailers and independent pharmacy groups, hospitals and health systems. The Company offers various services, such as specialty drug dispensing, retail specialty services, hospital and health system services, and hub services. The Company’s patient care system is used to coordinate and track patient adherence and safety.

American Renal Associates Company Profile

American Renal Associates Holdings, Inc. is a dialysis service provider in the United States focused on joint venture (JV) partnerships with physicians. As of December 31, 2016, the Company owned and operated 214 dialysis clinics in partnership with 379 nephrologist partners treating over 14,000 patients in 25 states and the District of Columbia. The Company operates its dialysis clinics exclusively through a JV model, in which it partners primarily with local nephrologists to develop, own and operate dialysis clinics, while the providers of the majority of dialysis services in the United States operate through a combination of subsidiaries and joint ventures. It provides patient care and clinical outcomes to patients suffering from end-stage renal disease (ESRD). Its clinics offer both in center and home dialysis options to meet the needs of patients. Its clinics primarily provide in center hemodialysis treatments and ancillary items and services.

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