AbbVie (NYSE:ABBV) and Verastem (NASDAQ:VSTM) Critical Review

Verastem (NASDAQ:VSTM) and AbbVie (NYSE:ABBV) are both healthcare companies, but which is the better stock? We will compare the two businesses based on the strength of their analyst recommendations, dividends, institutional ownership, earnings, profitability, risk and valuation.

Institutional and Insider Ownership

88.4% of Verastem shares are owned by institutional investors. Comparatively, 70.2% of AbbVie shares are owned by institutional investors. 1.9% of Verastem shares are owned by insiders. Comparatively, 0.1% of AbbVie shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Volatility & Risk

Verastem has a beta of 0.45, indicating that its stock price is 55% less volatile than the S&P 500. Comparatively, AbbVie has a beta of 0.2, indicating that its stock price is 80% less volatile than the S&P 500.

Profitability

This table compares Verastem and AbbVie’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Verastem	-178.38%	-359.49%	-78.60%
AbbVie	15.67%	-450.55%	16.50%

Analyst Ratings

This is a summary of recent recommendations for Verastem and AbbVie, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Verastem	1	1	11	0	2.77
AbbVie	0	6	22	1	2.83

Verastem currently has a consensus price target of $16.83, indicating a potential upside of 105.79%. AbbVie has a consensus price target of $297.46, indicating a potential upside of 0.77%. Given Verastem’s higher possible upside, equities research analysts clearly believe Verastem is more favorable than AbbVie.

Valuation and Earnings

This table compares Verastem and AbbVie”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Verastem	$30.91 million	33.35	-$209.47 million	($2.05)	-3.99
AbbVie	$66.01 billion	7.90	$4.23 billion	$5.81	50.81

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

Summary

AbbVie beats Verastem on 9 of the 15 factors compared between the two stocks.

About Verastem

Verastem, Inc. is a biopharmaceutical company focused on developing and commercializing medicines for cancer. Its research has centered on signaling pathways involved in tumor growth, including the RAS/MAPK pathway. The company’s product, AVMAPKI FAKZYNJA CO-PACK, combines avutometinib and defactinib. The U.S. Food and Drug Administration approved the combination for certain adults with KRAS-mutated recurrent low-grade serous ovarian cancer who have received prior systemic therapy. Verastem is based in Needham, Massachusetts, and also develops investigational cancer therapies, including potential uses of avutometinib in combination with other medicines.

About AbbVie

AbbVie is a biopharmaceutical company that discovers, develops and markets medicines for a range of serious health conditions. Its research and product portfolio spans immunology, oncology, neuroscience and other therapeutic areas. Key products include the immunology medicines Skyrizi and Rinvoq, cancer treatments such as Imbruvica and Venclexta, and neuroscience therapies including Botox and Vraylar. Through its Allergan acquisition, AbbVie also offers aesthetics products such as Botox Cosmetic and Juvéderm.