Reviewing Lannett (LCI) and Aralez Pharmaceuticals (ARLZ)

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

Volatility and Risk

Lannett has a beta of 2.73, indicating that its share price is 173% more volatile than the S&P 500. Comparatively, Aralez Pharmaceuticals has a beta of 1.37, indicating that its share price is 37% more volatile than the S&P 500.

Valuation and Earnings

This table compares Lannett and Aralez Pharmaceuticals’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Lannett $633.34 million 1.64 -$580,000.00 $1.12 24.55
Aralez Pharmaceuticals $54.27 million 2.06 -$102.97 million ($1.69) -0.99

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

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Lannett and Aralez Pharmaceuticals, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Lannett 0 3 2 0 2.40
Aralez Pharmaceuticals 0 0 2 0 3.00

Lannett currently has a consensus price target of $21.50, indicating a potential downside of 21.82%. Aralez Pharmaceuticals has a consensus price target of $4.00, indicating a potential upside of 139.52%. Given Aralez Pharmaceuticals’ stronger consensus rating and higher possible upside, analysts plainly believe Aralez Pharmaceuticals is more favorable than Lannett.

Insider and Institutional Ownership

96.8% of Lannett shares are owned by institutional investors. Comparatively, 23.5% of Aralez Pharmaceuticals shares are owned by institutional investors. 15.0% of Lannett shares are owned by insiders. Comparatively, 6.7% of Aralez Pharmaceuticals shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Profitability

This table compares Lannett and Aralez Pharmaceuticals’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Lannett 6.67% 18.23% 6.16%
Aralez Pharmaceuticals -112.89% -118.13% -20.79%

Summary

Lannett beats Aralez Pharmaceuticals on 9 of the 12 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.

Aralez Pharmaceuticals Company Profile

Aralez Pharmaceuticals Inc. is a Canada-based specialty pharmaceutical company. The Company focuses on acquiring, developing and commercializing products in cardiovascular, pain and other areas. The Company’s products include Fibricor, Cambia, Fiorinal, Fiorinal C, Soriatane, Bezalip SR, NeoVisc, Uracyst, Durela, Proferrin, Resultz and Collatamp G. Its development products include YOSPRALA and Bilastine. Fibricor (fenofibric acid) is indicated as a complementary therapy along with diet for the treatment of hypertriglyceridemia, and as a complementary therapy along with diet to reduce elevated low-density lipoprotein cholesterol (LDL-C), total cholesterol (Total-C), triglycerides (TG) and apolipoprotein B (Apo B). Fibricor is also used to increase high-density lipoprotein (HDL) cholesterol (HDL-C) in patients with hypercholesterolemia or mixed dyslipidemia. Cambia (diclofenac potassium for oral solution) is a non-steroidal anti-inflammatory drug (NSAID).

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