Analyzing Royalty Pharma (NASDAQ:RPRX) and Chugai Pharmaceutical (OTCMKTS:CHGCY)

Chugai Pharmaceutical (OTCMKTS:CHGCY) and Royalty Pharma (NASDAQ:RPRX) are both large-cap healthcare companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, profitability, earnings, analyst recommendations, institutional ownership, risk and valuation.

Volatility and Risk

Chugai Pharmaceutical has a beta of 0.6, indicating that its share price is 40% less volatile than the S&P 500. Comparatively, Royalty Pharma has a beta of 0.42, indicating that its share price is 58% less volatile than the S&P 500.

Valuation & Earnings

This table compares Chugai Pharmaceutical and Royalty Pharma”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Chugai Pharmaceutical	$8.41 billion	8.40	$2.91 billion	$0.92	23.33
Royalty Pharma	$2.38 billion	15.34	$770.95 million	$1.45	43.76

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

Dividends

Chugai Pharmaceutical pays an annual dividend of $0.25 per share and has a dividend yield of 1.2%. Royalty Pharma pays an annual dividend of $0.94 per share and has a dividend yield of 1.5%. Chugai Pharmaceutical pays out 27.2% of its earnings in the form of a dividend. Royalty Pharma pays out 64.8% 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. Royalty Pharma has raised its dividend for 5 consecutive years. Royalty Pharma is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a summary of recent recommendations for Chugai Pharmaceutical and Royalty Pharma, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Chugai Pharmaceutical	0	3	1	1	2.60
Royalty Pharma	0	0	8	0	3.00

Royalty Pharma has a consensus target price of $61.57, suggesting a potential downside of 2.97%. Given Royalty Pharma’s stronger consensus rating and higher possible upside, analysts plainly believe Royalty Pharma is more favorable than Chugai Pharmaceutical.

Profitability

This table compares Chugai Pharmaceutical and Royalty Pharma’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Chugai Pharmaceutical	35.09%	23.76%	19.92%
Royalty Pharma	32.14%	30.01%	14.91%

Insider and Institutional Ownership

0.0% of Chugai Pharmaceutical shares are owned by institutional investors. Comparatively, 54.3% of Royalty Pharma shares are owned by institutional investors. 18.8% of Royalty Pharma shares are owned 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.

Summary

Royalty Pharma beats Chugai Pharmaceutical on 11 of the 18 factors compared between the two stocks.

About Chugai Pharmaceutical

Chugai Pharmaceutical Co., Ltd., together with its subsidiaries, engages in the research, development, manufacture, sale, importation, and exportation of pharmaceuticals in Japan and internationally. The company’s products for oncology primarily include Avastin, FoundationOne, Polivy, Rozlytrek, Tecentriq, Perjeta, Alecensa, Herceptin, Kadcyla, Rituxan, and Gazyva; Edirol, an Osteoporosis agent; Mircera, an erythropoiesis agent; Oxarol, an agent for secondary hyperparathyroidism; and other diseases comprise Hemlibra, CellCept, Bonviva, Tamiflu, Evrysdi, Ronapreve, Vabysmo, and Enspryng. It has various development product candidates in the areas of oncology, immunology, neuroscience, hematology, ophthalmology, and other diseases. Chugai Pharmaceutical Co., Ltd. has strategic alliances and collaboration with Roche Group. The company was founded in 1925 and is headquartered in Chuo, Japan. Chugai Pharmaceutical Co., Ltd. operates as a subsidiary of Roche Holding Ltd.

About Royalty Pharma

Royalty Pharma plc operates as a buyer of biopharmaceutical royalties and a funder of innovations in the biopharmaceutical industry in the United States. It is also involved in the identification, evaluation, and acquisition of royalties on various biopharmaceutical therapies. In addition, the company collaborates with innovators from academic institutions, research hospitals and not-for-profits, small and mid-cap biotechnology companies, and pharmaceutical companies. Its portfolio consists of royalties on approximately 35 commercial products and 14 development-stage product candidates that address various therapeutic areas, such as rare disease, cancer, neuroscience, immunology, respiratory, infectious disease, hematology, and diabetes. The company was founded in 1996 and is based in New York, New York.