Is Catalyst Biosciences (CBIO) Significantly Overvalued?
Catalyst Biosciences Inc (NASDAQ:CBIO) has seen a significant daily gain of 18.1% and a 3-month gain of 204.39%. Despite the impressive gains, the company reported a Loss Per Share of 1.5. The question then arises: is the stock significantly overvalued? To answer this, we delve into a comprehensive valuation analysis. Readers are encouraged to follow along for a deeper understanding of the company's financial health and prospects.
Company Overview
Catalyst Biosciences is a clinical-stage biopharmaceutical company focusing on developing novel medicines for serious medical conditions. The company's product development efforts are primarily in the field of hemostasis, aiming to develop valuable therapies for individuals with hemophilia. The stock price currently stands at $0.69, whereas the estimated fair value (GF Value) is $0.13, indicating a possible overvaluation.
Understanding the GF Value
The GF Value is a proprietary measure of a stock's intrinsic value. It is computed based on historical trading multiples, a GuruFocus adjustment factor based on the company's past performance and growth, and future business performance estimates. The GF Value Line provides an overview of the fair value that the stock should ideally be traded at. If the stock price is significantly above the GF Value Line, the stock is considered overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
According to GuruFocus' valuation method, Catalyst Biosciences (NASDAQ:CBIO) appears to be significantly overvalued. The stock's fair value is estimated based on historical multiples, internal adjustments based on past business growth, and future business performance estimates. At its current price of $0.69 per share, Catalyst Biosciences stock is considered significantly overvalued. As a result, the long-term return of its stock is likely to be much lower than its future business growth.
Financial Strength
Before investing in a company's stock, it is crucial to assess its financial strength. Companies with poor financial strength pose a higher risk of permanent loss. A great way to understand a company's financial strength is by looking at its cash-to-debt ratio and interest coverage. Catalyst Biosciences has no debt, resulting in a cash-to-debt ratio that is better than 99.87% of 1498 companies in the Biotechnology industry. The overall financial strength of Catalyst Biosciences is 6 out of 10, indicating fair financial strength.
Profitability and Growth
Investing in profitable companies poses less risk, especially those that have demonstrated consistent profitability over the long term. Catalyst Biosciences has been profitable 0 over the past 10 years. Over the past twelve months, the company had a revenue of $0 million and a Loss Per Share of $1.5. Its operating margin is 0%, which ranks worse than 0% of 1029 companies in the Biotechnology industry. Overall, GuruFocus ranks the profitability of Catalyst Biosciences at 1 out of 10, indicating poor profitability.
One of the most important factors in the valuation of a company is growth. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Catalyst Biosciences is not available due to lack of revenue growth data. The 3-year average EBITDA growth is 41.4%, which ranks better than 85.76% of 1264 companies in the Biotechnology industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) is a good way to evaluate its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. 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 exceeds the WACC, the company is likely creating value for its shareholders. During the past 12 months, Catalyst Biosciences's ROIC was -225.72 while its WACC came in at 6.01.
Conclusion
In conclusion, the stock of Catalyst Biosciences (NASDAQ:CBIO) is believed to be significantly overvalued. The company's financial condition is fair, and its profitability is poor. Its growth ranks better than 85.76% of 1264 companies in the Biotechnology industry. To learn more about Catalyst Biosciences stock, you can check out its 30-Year Financials here.
To find out the high-quality companies that may deliver above-average returns, please check out GuruFocus High Quality Low Capex Screener.
This article first appeared on GuruFocus.
