Acorda Therapeutics (ACOR): A Comprehensive Analysis of Its Market Value
Acorda Therapeutics Inc (NASDAQ:ACOR) experienced a daily loss of 11.31% and a three-month gain of 21.76%. The stock's per-share loss stands at 21.35. This article aims to answer the question: Is Acorda Therapeutics fairly valued? Let's delve into a comprehensive valuation analysis of the company.
Company Overview
Acorda Therapeutics Inc is a biopharmaceutical company that focuses on developing therapies to restore function and improve the lives of people with neurological disorders. The company markets Inbrija (levodopa inhalation powder), approved in the U.S. for intermittent treatment of OFF episodes in people with Parkinson's disease treated with carbidopa/levodopa. Acorda Therapeutics also markets branded Ampyra (dalfampridine) Extended-Release Tablets, 10 mg to improve walking in adults with multiple sclerosis.
With a current stock price of $13.1 and a market cap of $16.30 million, the company's GF Value, an estimation of fair value, is $14. This comparison between the stock price and the GF Value lays the foundation for a deeper exploration of the company's value.
Understanding GF Value
The GF Value represents the current intrinsic value of a stock derived from our proprietary method. The GF Value Line on our summary page provides an overview of the fair value that the stock should be traded at. It is calculated based on three factors:
Historical multiples (PE Ratio, PS Ratio, PB Ratio, and Price-to-Free-Cash-Flow) that the stock has traded at.
GuruFocus adjustment factor based on the company's past returns and growth.
Future estimates of the business performance.
We believe the GF Value Line is the fair value that the stock should be traded at. The stock price will most likely fluctuate around the GF Value Line. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher.
According to GuruFocus Value calculation, the stock of Acorda Therapeutics is estimated to be fairly valued. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $13.1 per share and the market cap of $16.30 million, Acorda Therapeutics stock is estimated to be fairly valued.
Because Acorda Therapeutics is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
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Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. It's important to review a company's financial strength before deciding whether to buy shares. Looking at the cash-to-debt ratio and interest coverage can give a good initial perspective on the company's financial strength. Acorda Therapeutics has a cash-to-debt ratio of 0.14, which ranks worse than 80.19% of 1050 companies in the Drug Manufacturers industry. Based on this, GuruFocus ranks Acorda Therapeutics's financial strength as 2 out of 10, suggesting a poor balance sheet.
Profitability and Growth
Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Typically, a company with high profit margins offers better performance potential than a company with low profit margins. Acorda Therapeutics has been profitable 4 years over the past 10 years. During the past 12 months, the company had revenues of $116.90 million and Loss Per Share of $21.35. Its operating margin of -19.05% is worse than 73.62% of 1035 companies in the Drug Manufacturers industry. Overall, GuruFocus ranks Acorda Therapeutics's profitability as poor.
One of the most important factors in the valuation of a company is growth. Long-term stock performance is closely correlated with growth according to GuruFocus research. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Acorda Therapeutics is -37.2%, which ranks worse than 95.83% of 911 companies in the Drug Manufacturers industry. The 3-year average EBITDA growth is 0%, which ranks worse than 0% of 887 companies in the Drug Manufacturers industry.
ROIC vs WACC
Another way to look at the profitability of a company is to compare its return on invested capital and the weighted cost of capital. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. We want to have the return on invested capital higher than the weighted cost of capital. For the past 12 months, Acorda Therapeutics's return on invested capital is -6.76, and its cost of capital is 16.3.
Conclusion
In conclusion, the stock of Acorda Therapeutics is estimated to be fairly valued. The company's financial condition is poor, and its profitability is poor. Its growth ranks worse than 0% of 887 companies in the Drug Manufacturers industry. To learn more about Acorda Therapeutics stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
