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Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) is a stock with outstanding fundamental characteristics. When we build an investment case, we need to look at the stock with a holistic perspective. In the case of ARNA, it is a financially-sound company with a strong track record of performance, trading at a great value. Below is a brief commentary on these key aspects. For those interested in understanding where the figures come from and want to see the analysis, take a look at the report on Arena Pharmaceuticals here.
Flawless balance sheet and undervalued
ARNA has a strong track record of performance. In the previous year, ARNA delivered an impressive double-digit return of 50%. Not surprisingly, ARNA outperformed its industry which returned 19%, giving us more conviction of the company's capacity to drive bottom-line growth going forward. ARNA is financially robust, with ample cash on hand and short-term investments to meet upcoming liabilities. This implies that ARNA manages its cash and cost levels well, which is an important determinant of the company’s health. ARNA appears to have made good use of debt, producing operating cash levels of 12.23x total debt in the prior year. This is a strong indication that debt is reasonably met with cash generated.
ARNA's share price is trading at below its true value, meaning that the market sentiment for the stock is currently bearish. According to my intrinsic value of the stock, which is driven by analyst consensus forecast of ARNA's earnings, investors now have the opportunity to buy into the stock to reap capital gains. Compared to the rest of the biotechs industry, ARNA is also trading below its peers, relative to earnings generated. This supports the theory that ARNA is potentially underpriced.
For Arena Pharmaceuticals, I've put together three essential factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for ARNA’s future growth? Take a look at our free research report of analyst consensus for ARNA’s outlook.
- Dividend Income vs Capital Gains: Does ARNA return gains to shareholders through reinvesting in itself and growing earnings, or redistribute a decent portion of earnings as dividends? Our historical dividend yield visualization quickly tells you what your can expect from ARNA as an investment.
- Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of ARNA? Explore our interactive list of stocks with large potential to get an idea of what else is out there you may be missing!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.