Critical Comparison: Ironwood Pharmaceuticals (NASDAQ:IRWD) vs. XBiotech (NASDAQ:XBIT)

XBiotech (NASDAQ:XBIT) and Ironwood Pharmaceuticals (NASDAQ:IRWD) are both small-cap medical companies, but which is the superior investment? We will compare the two companies based on the strength of their risk, analyst recommendations, valuation, profitability, dividends, institutional ownership and earnings.

Institutional and Insider Ownership

55.7% of XBiotech shares are held by institutional investors. 33.1% of XBiotech shares are held by insiders. Comparatively, 12.9% of Ironwood Pharmaceuticals shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Earnings and Valuation

This table compares XBiotech and Ironwood Pharmaceuticals”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
XBiotech	$4.01 million	48.65	-$24.56 million	($1.08)	-5.93
Ironwood Pharmaceuticals	$442.73 million	1.24	-$1.00 billion	($0.03)	-114.33

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

Analyst Recommendations

This is a breakdown of recent recommendations for XBiotech and Ironwood Pharmaceuticals, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
XBiotech	0	0	0	0	0.00
Ironwood Pharmaceuticals	0	3	3	0	2.50

Ironwood Pharmaceuticals has a consensus price target of $10.40, indicating a potential upside of 203.21%. Given Ironwood Pharmaceuticals’ stronger consensus rating and higher probable upside, analysts plainly believe Ironwood Pharmaceuticals is more favorable than XBiotech.

Volatility and Risk

XBiotech has a beta of 1.41, indicating that its share price is 41% more volatile than the S&P 500. Comparatively, Ironwood Pharmaceuticals has a beta of 0.41, indicating that its share price is 59% less volatile than the S&P 500.

Profitability

This table compares XBiotech and Ironwood Pharmaceuticals’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
XBiotech	N/A	-15.99%	-14.85%
Ironwood Pharmaceuticals	-0.65%	-0.96%	0.74%

Summary

Ironwood Pharmaceuticals beats XBiotech on 7 of the 13 factors compared between the two stocks.

About XBiotech

XBiotech Inc., a biopharmaceutical company, discovers, develops, and commercializes True Human monoclonal antibodies for treating various diseases. The company focuses on developing a pipeline of product candidates targeting both inflammatory and infectious diseases. It is also developing interleukin-1 alpha therapies to treat variety of medical conditions, such as cancer, stroke, heart attack, or arthritis; and mediates tissue breakdown, angiogenesis, the formation of blood clots, malaise, muscle wasting, and inflammation. The company was incorporated in 2005 and is headquartered in Austin, Texas.

About Ironwood Pharmaceuticals

Ironwood Pharmaceuticals, Inc., a healthcare company, focuses on the development and commercialization of gastrointestinal (GI) products. It markets linaclotide, a guanylate cyclase type-C (GC-C) agonist for the treatment of adults suffering from irritable bowel syndrome with constipation or chronic idiopathic constipation under the LINZESS name in the United States, Mexico, Japan, Saudi Arabia, and China, as well as under the CONSTELLA name in the Canada and European countries. The company is also developing IW-3300, a GC-C agonist for the treatment of visceral pain conditions, including interstitial cystitis/bladder pain syndrome and endometriosis; Apraglutide, a next-generation, long-acting synthetic peptide analog of glucagon-like peptide-2, as a differentiated therapeutic for rare diseases, including short bowel syndrome dependent on parenteral support and acute graft versus host disease; and CNP-104, an immune nanoparticle for the treatment of primary biliary cholangitis. The company has strategic partnerships with AbbVie Inc., AstraZeneca AB, and Astellas Pharma Inc. for the development and commercialization of linaclotide. The company was formerly known as Microbia, Inc. and changed its name to Ironwood Pharmaceuticals, Inc. in April 2008. Ironwood Pharmaceuticals, Inc. was incorporated in 1998 and is headquartered in Boston, Massachusetts.