Ironwood Pharmaceuticals Inc (IRWD): A Deep Dive into Its Performance Potential
Long-established in the Drug Manufacturers industry, Ironwood Pharmaceuticals Inc (NASDAQ:IRWD) has enjoyed a stellar reputation. It has recently witnessed a daily gain of 10.05%, juxtaposed with a three-month change of -13.71%. However, fresh insights from the GuruFocus Score Rating hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of Ironwood Pharmaceuticals Inc.
Understanding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
Financial strength rank: 2/10
Profitability rank: 3/10
Growth rank: 2/10
GF Value rank: 10/10
Momentum rank: 4/10
Based on the above method, GuruFocus assigned Ironwood Pharmaceuticals Inc the GF Score of 57 out of 100, which signals poor future outperformance potential.
Ironwood Pharmaceuticals Inc: A Snapshot
Ironwood Pharmaceuticals Inc, with a market cap of $1.48 billion, is a specialty and generic drug manufacturing company that operates a human therapeutics segment. The company is focused on advancing innovative product opportunities in areas of large unmet need, including irritable bowel syndrome with constipation, chronic idiopathic constipation, hyperuricemia associated with uncontrolled gout, uncontrolled gastroesophageal reflux disease, and vascular and fibrotic diseases. Despite its sales of $427.28 million, the company has an operating margin of -204.36%, indicating potential challenges in profitability.
Financial Strength Analysis
Ironwood Pharmaceuticals Inc's financial strength indicators present some concerning insights about the company's balance sheet health. The company has an interest coverage ratio of 0, which positions it worse than 0% of 685 companies in the Drug Manufacturers industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. The company's Altman Z-Scoreis just -7.13, which is below the distress zone of 1.81. This suggests that the company may face financial distress over the next few years. Additionally, the company's low cash-to-debt ratio at 0.22 indicates a struggle in handling existing debt levels.
Profitability Breakdown
Ironwood Pharmaceuticals Inc's low Profitability rank can also raise warning signals. The company's Gross Margin has also declined over the past five years, as evidenced by the data: 2018: 90.55; 2019: 94.43; 2020: 99.19; 2021: 0; 2022: 0. This trend underscores the company's struggles to convert its revenue into profits.
Growth Prospects
A lack of significant growth is another area where Ironwood Pharmaceuticals Inc seems to falter, as evidenced by the company's low Growth rank. The company's revenue has declined by -7.1 per year over the past three years, which underperforms worse than 80.52% of 924 companies in the Drug Manufacturers industry. Stagnating revenues may pose concerns in a fast-evolving market. Lastly, Ironwood Pharmaceuticals Inc predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Conclusion
Given the company's financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights Ironwood Pharmaceuticals Inc's unparalleled position for potential underperformance. While the company has a strong reputation in the Drug Manufacturers industry, its current financial indicators and growth prospects suggest that it may struggle to maintain its historical performance. Investors should consider these factors when making investment decisions.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
This article first appeared on GuruFocus.
