Check-Cap (NASDAQ: CHEK) and NOVAN INC (NASDAQ:NOVN) are both small-cap medical companies, but which is the better investment? We will contrast the two companies based on the strength of their profitability, earnings, dividends, analyst recommendations, risk, valuation and institutional ownership.

Earnings & Valuation

This table compares Check-Cap and NOVAN INC’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Check-Cap N/A N/A -$9.62 million ($0.59) -3.07
NOVAN INC $768,999.00 127.00 -$49.04 million ($7.93) -0.77

Check-Cap has higher revenue, but lower earnings than NOVAN INC. Check-Cap is trading at a lower price-to-earnings ratio than NOVAN INC, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

19.3% of Check-Cap shares are owned by institutional investors. Comparatively, 6.1% of NOVAN INC shares are owned by institutional investors. 10.7% of NOVAN INC shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Profitability

This table compares Check-Cap and NOVAN INC’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Check-Cap N/A -98.88% -80.97%
NOVAN INC N/A -194.61% -99.61%

Analyst Recommendations

This is a breakdown of current ratings for Check-Cap and NOVAN INC, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Check-Cap 0 0 3 0 3.00
NOVAN INC 0 1 3 0 2.75

Check-Cap currently has a consensus target price of $6.00, indicating a potential upside of 231.49%. NOVAN INC has a consensus target price of $17.24, indicating a potential upside of 182.20%. Given Check-Cap’s stronger consensus rating and higher probable upside, equities research analysts clearly believe Check-Cap is more favorable than NOVAN INC.

Summary

Check-Cap beats NOVAN INC on 7 of the 9 factors compared between the two stocks.

About Check-Cap

Check-Cap Ltd. (Check-Cap) is a clinical-stage medical diagnostics company. The Company is engaged in the development of an ingestible imaging capsule that utilizes low-dose X-rays for the detection and imaging of colonic polyps and colorectal cancers, or CRC. The Company’s system consists of main components, such as ingestible scanning capsule; Capsule Positioning System (CPS), a recorder worn on the patient’s back, and a personal computer (PC)-based work station for data reconstruction and image processing. The Company’s scanning capsule will be swallowed and propelled by natural motility through the gastrointestinal tract and excreted naturally with no need for retrieval for data collection. Its scanning capsule employs low-dose X-rays, which allow the system to image the interior lining of the colon even when surrounded by intestinal content. Its capsule transmits information to a receiving device worn on the patient’s body that stores the information for off-line analysis.

About NOVAN INC

Novan, Inc. is a late-stage pharmaceutical company. The Company is engaged in the development and commercialization of therapies using its nitric oxide platform. The Company develops product candidates using its Nitricil technology, which enables the Company to engineer tunable new chemical entities (NCEs). The Company’s formulation science enables it to further tune the release of nitric oxide when applied to the skin by using the combinations of inactive ingredients. It is developing SB204 for the treatment of acne vulgaris in Phase III. The Company is developing its product candidate, SB206, for the treatment of external genital and perianal warts in Phase II. It is developing SB208, an investigational topical anti-fungal for the treatment of fungal infections of the skin and nails. It is developing SB204 for the treatment of inflammatory skin diseases. Its pipeline also includes SB414, a topical cream product candidate.

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