Critical Contrast: Relay Therapeutics (NASDAQ:RLAY) & Alector (NASDAQ:ALEC)

Alector (NASDAQ:ALEC) and Relay Therapeutics (NASDAQ:RLAY) are both small-cap medical companies, but which is the superior business? We will compare the two businesses based on the strength of their analyst recommendations, risk, earnings, institutional ownership, valuation, dividends and profitability.

Volatility & Risk

Alector has a beta of 0.51, indicating that its share price is 49% less volatile than the S&P 500. Comparatively, Relay Therapeutics has a beta of 1.59, indicating that its share price is 59% more volatile than the S&P 500.

Profitability

This table compares Alector and Relay Therapeutics’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Alector	-257.54%	-108.77%	-27.03%
Relay Therapeutics	N/A	-45.75%	-40.75%

Earnings and Valuation

This table compares Alector and Relay Therapeutics”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Alector	$61.51 million	2.96	-$130.39 million	($1.70)	-1.09
Relay Therapeutics	$10.01 million	69.59	-$341.97 million	($2.61)	-1.59

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

Analyst Ratings

This is a summary of current ratings for Alector and Relay Therapeutics, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Alector	2	2	3	0	2.14
Relay Therapeutics	0	1	10	0	2.91

Alector currently has a consensus price target of $3.75, indicating a potential upside of 101.61%. Relay Therapeutics has a consensus price target of $20.50, indicating a potential upside of 392.79%. Given Relay Therapeutics’ stronger consensus rating and higher probable upside, analysts clearly believe Relay Therapeutics is more favorable than Alector.

Institutional and Insider Ownership

85.8% of Alector shares are owned by institutional investors. Comparatively, 97.0% of Relay Therapeutics shares are owned by institutional investors. 9.1% of Alector shares are owned by insiders. Comparatively, 4.3% of Relay Therapeutics shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Summary

Relay Therapeutics beats Alector on 8 of the 14 factors compared between the two stocks.

About Alector

Alector, Inc., a clinical stage biopharmaceutical company, develops therapies for the treatment of neurodegeneration diseases. Its products include AL001, an immune activity in the brain with genetic links to multiple neurodegenerative disorders, which is in Phase III clinical trial for the treatment of frontotemporal dementia, Alzheimer's, Parkinson's, and amyotrophic lateral sclerosis diseases; and AL101 that is in Phase I clinical trial for the treatment of neurodegenerative diseases, including Alzheimer's and Parkinson's diseases. The company also offers AL002, a product candidate that is in Phase II clinical trial for the treatment of Alzheimer's disease. Alector, Inc. has a collaboration agreement with Adimab, LLC for the research and development of antibodies; and a strategic collaboration agreement with GlaxoSmithKline plc for the development and commercialization of monoclonal antibodies, such as AL001 and AL101 to treat neurodegenerative diseases. The company was founded in 2013 and is headquartered in South San Francisco, California.

About Relay Therapeutics

Relay Therapeutics, Inc. operates as a clinical-stage precision medicines company. It engages in transforming the drug discovery process with an initial focus on enhancing small molecule therapeutic discovery in targeted oncology and genetic disease indications. The company’s lead product candidates include RLY-4008, an oral small molecule inhibitor of fibroblast growth factor receptor 2 (FGFR2), which is in a first-in-human clinical trial for patients with advanced or metastatic FGFR2-altered solid tumors; RLY-2608, a lead mutant-PI3Ka inhibitor program that targets phosphoinostide 3 kinase alpha; and Migoprotafib (GDC-1971), an oral, small molecule, potent and selective inhibitor of the protein tyrosine phosphatase SHP2 that binds and stabilizes Src homology region 2 domain-containing phosphatase-2 (SHP2) as a monotherapy in patients with advanced or metastatic solid tumors. In addition, it has collaboration and license agreements with D. E. Shaw Research, LLC to research certain biological targets through the use of D. E. Shaw Research computational modeling capabilities focused on analysis of protein motion to develop and commercialize compounds and products directed to such targets; and Genentech, Inc. for the development and commercialization of GDC-1971. The company was formerly known as Allostery, Inc. and changed its name to Relay Therapeutics, Inc. in December 2015. Relay Therapeutics, Inc. was incorporated in 2015 and is headquartered in Cambridge, Massachusetts.