Contrasting Dr. Reddy’s Laboratories (NYSE:RDY) and Otsuka (OTCMKTS:OTSKY)

Otsuka (OTCMKTS:OTSKY) and Dr. Reddy’s Laboratories (NYSE:RDY) are both large-cap healthcare companies, but which is the better stock? We will contrast the two companies based on the strength of their analyst recommendations, profitability, institutional ownership, risk, dividends, valuation and earnings.

Institutional and Insider Ownership

3.8% of Dr. Reddy’s Laboratories shares are held by institutional investors. 2.0% of Dr. Reddy’s Laboratories shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Profitability

This table compares Otsuka and Dr. Reddy’s Laboratories’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Otsuka	15.50%	12.86%	9.59%
Dr. Reddy’s Laboratories	10.15%	9.49%	6.32%

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for Otsuka and Dr. Reddy’s Laboratories, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Otsuka	1	2	1	0	2.00
Dr. Reddy’s Laboratories	1	1	1	0	2.00

Dr. Reddy’s Laboratories has a consensus price target of $1,450.00, suggesting a potential upside of 11,724.19%. Given Dr. Reddy’s Laboratories’ higher probable upside, analysts plainly believe Dr. Reddy’s Laboratories is more favorable than Otsuka.

Dividends

Otsuka pays an annual dividend of $0.37 per share and has a dividend yield of 1.0%. Dr. Reddy’s Laboratories pays an annual dividend of $0.06 per share and has a dividend yield of 0.5%. Otsuka pays out 14.9% of its earnings in the form of a dividend. Dr. Reddy’s Laboratories pays out 13.6% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Volatility & Risk

Otsuka has a beta of 0.09, indicating that its stock price is 91% less volatile than the S&P 500. Comparatively, Dr. Reddy’s Laboratories has a beta of 0.29, indicating that its stock price is 71% less volatile than the S&P 500.

Earnings and Valuation

This table compares Otsuka and Dr. Reddy’s Laboratories”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Otsuka	$16.51 billion	2.35	$2.43 billion	$2.49	14.53
Dr. Reddy’s Laboratories	$331.19 billion	0.03	$456.00 million	$0.44	27.87

Otsuka has higher earnings, but lower revenue than Dr. Reddy’s Laboratories. Otsuka is trading at a lower price-to-earnings ratio than Dr. Reddy’s Laboratories, indicating that it is currently the more affordable of the two stocks.

About Otsuka

Otsuka Holdings Co., Ltd. engages in the pharmaceuticals, nutraceuticals, consumer products, and other businesses worldwide. The company develops pharmaceutical products in the fields of psychiatry, neurology, oncology, cardiovascular and renal system, digestive system, ophthalmology, and diagnostics, as well as intravenous solutions and medical devices. It also provides clinical testing, medical equipment, food products, cosmetics, functional food products, chemical products, soft drinks, beverages, analytical and measurement instruments, nutritional products, vehicle headlight testers, synthetic resin molded products, paper products, and insecticide and toiletry products. In addition, the company offers IT solution services; adhesive tapes; flaky titanate and compounds; IV solutions; infusion and clinical nutrition products; hydrazine; plant-based food products; reinsurance underwriting services; wine; stable isotopes; food supplements; urinary tract health products; software and services for management of mental healthcare systems; anticancer drugs; terracess; bio-pesticides; dietetic food products; spring and mineral water; and polyolefin foams. Further, it engages in the warehousing and transport, medical device operational management, shared service, environmental health management, and venture capital and incubation businesses; rental of medical devices and related products; purchase and sale of agricultural products; import and export trading business; tuberculosis research and development activities; manufacturing and development of xenotransplantation products; and processing and marketing of functional films, as well as planning, design, production, and construction of ceramic boards and arts, ceramic walls, reliefs, terracotta, ceramic OT and portraits, and ceramic sign boards; and operation of travel agency, and Hotel Ridge and California Table. Otsuka Holdings Co., Ltd. was founded in 1921 and is headquartered in Tokyo, Japan.

About Dr. Reddy’s Laboratories

Dr. Reddy’s Laboratories Limited, together with its subsidiaries, operates as an integrated pharmaceutical company worldwide. It operates through Global Generics, Pharmaceutical Services and Active Ingredients (PSAI), and Others segments. The company’s Global Generics segment manufactures and markets prescription and over-the-counter finished pharmaceutical products that are marketed under a brand name or as a generic finished dosages with therapeutic equivalence to branded formulations, as well as engages in the biologics business. The PSAI segment manufactures and markets active pharmaceutical ingredients and intermediates, which are principal ingredients for finished pharmaceutical products. This segment also provides contract research services; and manufactures and sells active pharmaceutical ingredients and steroids in accordance with the specific customer requirements. The Others segment engages in developing therapies in the fields of oncology and inflammation; research and development of differentiated formulations; and provides digital healthcare and information technology enabled business support services. The company offers its products for various therapeutic categories primarily include gastro-intestinal, cardiovascular, anti-diabetic, dermatology, oncology, respiratory, stomatology, urology, and nephrology. Dr. Reddy’s Laboratories Limited was incorporated in 1984 and is headquartered in Hyderabad, India.