Is It The Right Time To Buy Tetraphase Pharmaceuticals Inc (NASDAQ:TTPH)?
Tetraphase Pharmaceuticals Inc (NASDAQ:TTPH), a pharmaceuticals company based in United States, received a lot of attention from a substantial price increase 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, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Tetraphase Pharmaceuticals’s outlook and valuation to see if the opportunity still exists. View our latest analysis for Tetraphase Pharmaceuticals
Is Tetraphase Pharmaceuticals still cheap?
The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-book ratio in this instance because there’s not enough visibility to forecast its cash flows, and its earnings doesn’t seem to reflect its true value. The stock’s ratio of 0.94x is currently trading slightly below its industry peers’ ratio of 2.61x, which means if you buy Tetraphase Pharmaceuticals today, you’d be paying a relatively reasonable price for it. And if you believe that Tetraphase Pharmaceuticals 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 Tetraphase Pharmaceuticals’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.
What does the future of Tetraphase Pharmaceuticals look like?
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. Tetraphase Pharmaceuticals’s earnings over the next few years are expected to increase by 50.39%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has already priced in TTPH’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at TTPH? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on TTPH, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for TTPH, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Tetraphase Pharmaceuticals. You can find everything you need to know about Tetraphase Pharmaceuticals in the latest infographic research report. If you are no longer interested in Tetraphase 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.
