Inovio Pharmaceuticals Inc (NASDAQ:INO), a biotechnology company based in United States, saw a decent share price growth in the teens level on the NasdaqGS over the last few months. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s take a look at INO’s outlook and value based on the most recent financial data to see if the opportunity still exists. View our latest analysis for Inovio Pharmaceuticals
What is INO worth?
The stock seems fairly valued at the moment according to my relative valuation model. In this instance, I’ve used the price-to-book (PB) ratio given that there is not enough information to reliably forecast the stock’s cash flows, and its earnings doesn’t seem to reflect its true value. I find that INO’s ratio of 3.9x is trading slightly below its industry peers’ ratio of 4.4x, which means if you buy INO today, you’d be paying a relatively fair price for it. And if you believe that INO should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that INO’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from INO?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a negative profit growth of -7.37% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for INO. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Currently, INO appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on INO, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on INO for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on INO should the price fluctuate below its true value.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Inovio Pharmaceuticals. You can find everything you need to know about INO in the latest infographic research report. If you are no longer interested in Inovio Pharmaceuticals, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.