- By GF Value
The stock of Agenus (NAS:AGEN, 30-year Financials) is believed to be modestly undervalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. 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 $2.69 per share and the market cap of $550.6 million, Agenus stock shows every sign of being modestly undervalued. GF Value for Agenus is shown in the chart below.
Because Agenus is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth, which averaged 5.4% over the past five years.
It is always important to check the financial strength of a company before buying its stock. Investing in companies with poor financial strength have a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage is a great way to understand the financial strength of a company. Agenus has a cash-to-debt ratio of 1.79, which is worse than 75% of the companies in Biotechnology industry. The overall financial strength of Agenus is 2 out of 10, which indicates that the financial strength of Agenus is poor. This is the debt and cash of Agenus over the past years:
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. Agenus has been profitable 0 years over the past 10 years. During the past 12 months, the company had revenues of $88.2 million and loss of $1.05 a share. Its operating margin of -131.58% in the middle range of the companies in Biotechnology industry. Overall, GuruFocus ranks Agenus's profitability as poor. This is the revenue and net income of Agenus over the past years:
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 Agenus is 5.4%, which ranks in the middle range of the companies in Biotechnology industry. The 3-year average EBITDA growth is 11.9%, which ranks in the middle range of the companies in Biotechnology industry.
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). 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. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Agenus's ROIC was -67.73, while its WACC came in at 19.97. The historical ROIC vs WACC comparison of Agenus is shown below:
In short, the stock of Agenus (NAS:AGEN, 30-year Financials) appears to be modestly undervalued. The company's financial condition is poor and its profitability is poor. Its growth ranks in the middle range of the companies in Biotechnology industry. To learn more about Agenus stock, you can check out its 30-year Financials here.
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This article first appeared on GuruFocus.