Aceto (ACET) and GlaxoSmithKline (GSK) Critical Review

Aceto (NASDAQ: ACET) and GlaxoSmithKline (NYSE:GSK) are both pharmaceuticals – nec companies, but which is the superior stock? We will compare the two businesses based on the strength of their profitability, institutional ownership, risk, valuation, analyst recommendations, dividends and earnings.

Profitability

This table compares Aceto and GlaxoSmithKline’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Aceto 1.07% 10.18% 3.95%
GlaxoSmithKline 7.79% 115.30% 9.69%

Analyst Recommendations

This is a breakdown of recent recommendations for Aceto and GlaxoSmithKline, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Aceto 0 2 1 0 2.33
GlaxoSmithKline 2 9 5 0 2.19

Aceto currently has a consensus price target of $15.00, suggesting a potential upside of 45.63%. GlaxoSmithKline has a consensus price target of $38.33, suggesting a potential upside of 9.12%. Given Aceto’s stronger consensus rating and higher possible upside, equities research analysts clearly believe Aceto is more favorable than GlaxoSmithKline.

Institutional and Insider Ownership

80.8% of Aceto shares are held by institutional investors. Comparatively, 9.8% of GlaxoSmithKline shares are held by institutional investors. 4.1% of Aceto shares are held by insiders. Comparatively, 10.0% of GlaxoSmithKline shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Dividends

Aceto pays an annual dividend of $0.26 per share and has a dividend yield of 2.5%. GlaxoSmithKline pays an annual dividend of $1.99 per share and has a dividend yield of 5.7%. Aceto pays out 123.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. GlaxoSmithKline pays out 163.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Valuation & Earnings

This table compares Aceto and GlaxoSmithKline’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Aceto $638.32 million 0.49 $11.37 million $0.21 49.05
GlaxoSmithKline $37.82 billion 2.28 $1.24 billion $1.22 28.80

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

Volatility and Risk

Aceto has a beta of 1.38, suggesting that its stock price is 38% more volatile than the S&P 500. Comparatively, GlaxoSmithKline has a beta of 0.98, suggesting that its stock price is 2% less volatile than the S&P 500.

Summary

GlaxoSmithKline beats Aceto on 10 of the 16 factors compared between the two stocks.

Aceto Company Profile

Aceto Corporation (Aceto) is engaged in the marketing, sales and distribution of finished dosage form generic pharmaceuticals, nutraceutical products, pharmaceutical active ingredients and intermediates, specialty performance chemicals inclusive of agricultural intermediates and agricultural protection products. The Company’s business is organized along product lines into three segments: Human Health, Pharmaceutical Ingredients and Performance Chemicals. As of June 30, 2016, it distributed over 1,100 chemical compounds used primarily as finished products or raw materials in the agricultural, coatings and industrial chemical industries. The Human Health segment includes finished dosage form generic drugs and nutraceutical products. As of June 30, 2016, the Pharmaceutical Ingredients segment had two product groups: Active Pharmaceutical Ingredients and Pharmaceutical Intermediates. The Performance Chemicals segment includes specialty chemicals and agricultural protection products.

GlaxoSmithKline Company Profile

GlaxoSmithKline plc is a global healthcare company. The Company operates through three segments: Pharmaceuticals, Vaccines and Consumer Healthcare. The Company focuses on its research across six areas: Respiratory diseases, human immunodeficiency virus (HIV)/infectious diseases, Vaccines, Immuno-inflammation, Oncology and Rare diseases. The Company makes a range of prescription medicines, vaccines and consumer healthcare products. The Pharmaceuticals business discovers, develops and commercializes medicines to treat a range of acute and chronic diseases. The Vaccines business provides vaccines for people of all ages from babies and adolescents to adults and older people. The Consumer Healthcare business develops and markets products in Wellness, Oral health, Nutrition and Skin health categories. Its product portfolio includes Adartrel, Bexsero, Daraprim and Quinvaxem. Its brands include Panadol, abreva, polident and physiogel.

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