Analyzing Avita Medical (NASDAQ:RCEL) and Pulmonx (NASDAQ:LUNG)

Avita Medical (NASDAQ:RCEL) and Pulmonx (NASDAQ:LUNG) are both small-cap healthcare companies, but which is the better investment? We will contrast the two businesses based on the strength of their profitability, earnings, valuation, risk, institutional ownership, dividends and analyst recommendations.

Insider and Institutional Ownership

27.7% of Avita Medical shares are held by institutional investors. Comparatively, 91.0% of Pulmonx shares are held by institutional investors. 2.2% of Avita Medical shares are held by insiders. Comparatively, 7.5% of Pulmonx shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Analyst Recommendations

This is a summary of recent ratings for Avita Medical and Pulmonx, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Avita Medical	1	1	5	0	2.57
Pulmonx	1	0	3	0	2.50

Avita Medical presently has a consensus target price of $13.40, suggesting a potential downside of 19.23%. Pulmonx has a consensus target price of $7.67, suggesting a potential upside of 199.48%. Given Pulmonx’s higher probable upside, analysts clearly believe Pulmonx is more favorable than Avita Medical.

Profitability

This table compares Avita Medical and Pulmonx’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Avita Medical	-42.65%	N/A	-69.58%
Pulmonx	-47.93%	-98.23%	-35.89%

Earnings & Valuation

This table compares Avita Medical and Pulmonx”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Avita Medical	$71.61 million	7.13	-$48.59 million	($1.44)	-11.52
Pulmonx	$90.50 million	1.23	-$54.00 million	($1.01)	-2.53

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

Volatility and Risk

Avita Medical has a beta of 2.03, meaning that its stock price is 103% more volatile than the S&P 500. Comparatively, Pulmonx has a beta of 0.19, meaning that its stock price is 81% less volatile than the S&P 500.

About Avita Medical

AVITA Medical, Inc., together with its subsidiaries, operates as a regenerative medicine company in the United States and internationally. The company's lead product is the RECELL System, a cell harvesting device used for the treatment of thermal burn wounds, full-thickness skin defects, and repigmentation of stable depigmented vitiligo lesions. It develops RECELL GO to control the manual process of disaggregation, filtration, and soak time. The company was formerly known as AVITA Therapeutics, Inc. AVITA Medical, Inc. was incorporated in 2020 and is headquartered in Valencia, California.

About Pulmonx

Pulmonx Corporation, a commercial-stage medical technology company, provides minimally invasive devices for the treatment of chronic obstructive pulmonary diseases. The company offers Zephyr Endobronchial Valve, a solution for the treatment of patients with hyperinflation associated with severe emphysema; and Chartis Pulmonary Assessment System, a balloon catheter and console system with flow and pressure sensors that are used to assess the presence of collateral ventilation. It also offers StratX Lung Analysis Platform, a cloud-based quantitative computed tomography analysis service that offers information on emphysema destruction, fissure completeness, and lobar volume to help identify target lobes for the treatment with Zephyr Valves. The company serves emphysema patients in the United States, Europe, the Middle East, Africa, the Asia-Pacific, and internationally. The company was formerly known as Pulmonx and changed its name to Pulmonx Corporation in December 2013. Pulmonx Corporation was incorporated in 1995 and is headquartered in Redwood City, California.