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

Profitability

This table compares Medtronic and Arch Therapeutics’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Medtronic 16.93% 12.63% 6.51%
Arch Therapeutics N/A -246.16% -130.60%

Volatility and Risk

Medtronic has a beta of 1, meaning that its share price has a similar volatility profile to the S&P 500.Comparatively, Arch Therapeutics has a beta of 4.53, meaning that its share price is 353% more volatile than the S&P 500.

Insider & Institutional Ownership

81.9% of Medtronic shares are held by institutional investors. Comparatively, 0.0% of Arch Therapeutics shares are held by institutional investors. 0.3% of Medtronic shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Analyst Ratings

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

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Medtronic 0 10 13 0 2.57
Arch Therapeutics 0 0 4 0 3.00

Medtronic currently has a consensus target price of $88.75, indicating a potential upside of 8.46%. Arch Therapeutics has a consensus target price of $2.83, indicating a potential upside of 287.07%. Given Arch Therapeutics’ stronger consensus rating and higher possible upside, analysts clearly believe Arch Therapeutics is more favorable than Medtronic.

Dividends

Medtronic pays an annual dividend of $1.84 per share and has a dividend yield of 2.2%. Arch Therapeutics does not pay a dividend. Medtronic pays out 50.5% of its earnings in the form of a dividend. Medtronic has raised its dividend for 39 consecutive years.

Earnings & Valuation

This table compares Medtronic and Arch Therapeutics’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Medtronic $29.71 billion 3.73 $4.03 billion $3.64 22.48
Arch Therapeutics N/A N/A -$7.78 million ($0.05) -14.64

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

Summary

Medtronic beats Arch Therapeutics on 11 of the 15 factors compared between the two stocks.

About Medtronic

Medtronic Public Limited Company (Medtronic) is a medical technology and services company. The Company develops, manufactures and markets its medical devices and technologies to hospitals, physicians, clinicians and patients in approximately 160 countries. The Company operates in four segments: Cardiac and Vascular Group, Minimally Invasive Technologies Group, Restorative Therapies Group and Diabetes Group. The Cardiac and Vascular Group segment includes Cardiac Rhythm & Heart Failure, Coronary & Structural Heart and Aortic & Peripheral Vascula. Its Minimally Invasive Technologies Group segment includes Surgical Solutions and Patient Monitoring and Recovery. Its Restorative Therapies Group segment includes Spine, Neuromodulation, Surgical Technologies and Neurovascular. Its Diabetes Group segment includes Intensive Insulin Management, Non-Intensive Diabetes Therapies and Diabetes Services & Solutions. The Company’s subsidiaries include Medtronic, Inc. and HeartWare International, Inc.

About Arch Therapeutics

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.

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