Arch Therapeutics (OTCMKTS: ARTH) and AxoGen (NASDAQ:AXGN) are both small-cap medical companies, but which is the superior investment? We will compare the two businesses based on the strength of their profitability, risk, institutional ownership, earnings, dividends, analyst recommendations and valuation.

Institutional and Insider Ownership

0.0% of Arch Therapeutics shares are owned by institutional investors. Comparatively, 66.0% of AxoGen shares are owned by institutional investors. 9.3% of AxoGen shares are owned 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 Arch Therapeutics and AxoGen’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Arch Therapeutics N/A -246.16% -130.60%
AxoGen -24.74% -91.00% -25.48%

Analyst Ratings

This is a summary of current recommendations and price targets for Arch Therapeutics and AxoGen, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Arch Therapeutics 0 0 4 0 3.00
AxoGen 0 0 6 0 3.00

Arch Therapeutics currently has a consensus target price of $2.83, suggesting a potential upside of 299.06%. AxoGen has a consensus target price of $26.17, suggesting a potential downside of 4.85%. Given Arch Therapeutics’ higher possible upside, research analysts clearly believe Arch Therapeutics is more favorable than AxoGen.

Risk and Volatility

Arch Therapeutics has a beta of 4.53, meaning that its share price is 353% more volatile than the S&P 500. Comparatively, AxoGen has a beta of 0.41, meaning that its share price is 59% less volatile than the S&P 500.

Valuation and Earnings

This table compares Arch Therapeutics and AxoGen’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Arch Therapeutics N/A N/A -$7.78 million ($0.05) -14.20
AxoGen $41.11 million 22.80 -$14.41 million ($0.40) -68.75

Arch Therapeutics has higher earnings, but lower revenue than AxoGen. AxoGen is trading at a lower price-to-earnings ratio than Arch Therapeutics, indicating that it is currently the more affordable of the two stocks.

Summary

AxoGen beats Arch Therapeutics on 6 of the 11 factors compared between the two stocks.

Arch Therapeutics Company Profile

Arch Therapeutics, Inc. is a development-stage company. The Company operates as a biotechnology company. The Company focuses on developing products to stop bleeding (hemostasis) and control leaking (sealant) during surgery and trauma care. The Company’s technology is based on a self-assembling peptide that creates a physical, mechanical barrier, which could be applied to seal organs or wounds that are leaking blood and other fluids. The Company’s primary product candidates, collectively known as the AC5 Devices (AC5), are designed to achieve hemostasis in surgical procedures. The Company’s product candidates rely on its self-assembling peptide technology and are designed to achieve hemostasis in skin wounds, and minimally invasive and open surgical procedures. The Company focuses on developing other product candidates based on its technology platform for use in a range of indications. As of September 30, 2016, the Company had not generated any revenues.

AxoGen Company Profile

AxoGen, Inc. provides surgical solutions for peripheral nerve injuries. The company’s surgical nerve repair solutions include Avance Nerve Graft, an off-the-shelf processed human nerve allograft for bridging severed nerves without the comorbidities associated with a second surgical site; AxoGuard Nerve Connector, a porcine submucosa extracellular matrix (ECM) coaptation aid for tensionless repair of severed nerves; and AxoGuard Nerve Protector, a porcine submucosa ECM product that is used to wrap and protect injured peripheral nerves, as well as reinforces the nerve reconstruction while preventing soft tissue attachments. Its solutions also comprise Avive Soft Tissue Membrane, a minimally processed human umbilical cord membrane that is used as a resorbable soft tissue covering to separate tissues and modulate inflammation in the surgical bed. In addition, the company offers AcroVal neurosensory and motor testing system, which consists of AcroGrip for use in hand grip strength measurement; AcroPinch for measuring pinch strength; and Pressure-Specified Sensory Device, a somatosensory evaluation and measurement device. Further, it provides AxoTouch two point discriminator, a tool that is used for measuring the innervation density of surface area of the skin. The company provides its products to hospitals, surgery centers, and military hospitals in the United States, Canada, the United Kingdom and other European countries, and internationally. AxoGen, Inc. is headquartered in Alachua, Florida.

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