Unveiling Pacific Biosciences of California (PACB)'s Value: Is It Really Priced Right? A ...
Despite a daily loss of -1.75% and a 3-month loss of -12.74%, Pacific Biosciences of California Inc (NASDAQ:PACB) currently has a Loss Per Share of 1.35. This leads us to question: Is the stock modestly undervalued? This article aims to answer this question through a comprehensive valuation analysis that integrates financial assessment and essential company details. We encourage you to read on for an in-depth exploration.
Company Introduction
Pacific Biosciences of California Inc is a biotechnology company focused on the design, development, and commercialization of tools for biological research. The company's sequencing systems are designed to resolve genetically complex problems and provide access to a wide range of applications. Most of the company's revenue is derived from North America, followed by Asia and Europe. Currently, the company's stock price stands at $11.52, while its GF Value, an estimation of fair value, is $14.28. This suggests that the stock might be undervalued.
Understanding GF Value
The GF Value represents the current intrinsic value of a stock derived from our exclusive method. The GF Value Line on our summary page gives an overview of the fair value that the stock should be traded at. It is calculated based on three factors:
Historical multiples (PE Ratio, PS Ratio, PB Ratio and Price-to-Free-Cash-Flow) that the stock has traded at.
GuruFocus adjustment factor based on the company's past returns and growth.
Future estimates of the business performance.
If the stock price is significantly above the GF Value Line, the stock may be overvalued and have poor future returns. On the other hand, if the stock price is significantly below the GF Value Line, the stock may be undervalued and have high future returns. At its current price of $11.52 per share, Pacific Biosciences of California has a market cap of $2.90 billion and the stock shows every sign of being modestly undervalued.
Because Pacific Biosciences of California is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth.
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Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it's crucial to review a company's financial strength before deciding to buy shares. Pacific Biosciences of California has a cash-to-debt ratio of 0.89, which ranks worse than 68.57% of 840 companies in the Medical Devices & Instruments industry. Based on this, GuruFocus ranks Pacific Biosciences of California's financial strength as 4 out of 10, suggesting poor balance sheet.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is less risky. Pacific Biosciences of California has been profitable 1 over the past 10 years. Over the past twelve months, the company had a revenue of $146.10 million and Loss Per Share of $1.35. Its operating margin is -207.35%, which ranks worse than 81.33% of 830 companies in the Medical Devices & Instruments industry. Overall, the profitability of Pacific Biosciences of California is ranked 2 out of 10, which indicates poor profitability.
Growth is probably the most important factor in the valuation of a company. The 3-year average annual revenue growth of Pacific Biosciences of California is -1.4%, which ranks worse than 73.29% of 730 companies in the Medical Devices & Instruments industry. The 3-year average EBITDA growth rate is -38.9%, which ranks worse than 92.13% of 737 companies in the Medical Devices & Instruments industry.
ROIC vs WACC
Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (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, Pacific Biosciences of California's ROIC is -28.48 while its WACC came in at 11.39.
Conclusion
In conclusion, the stock of Pacific Biosciences of California (NASDAQ:PACB) shows every sign of being modestly undervalued. The company's financial condition is poor and its profitability is poor. Its growth ranks worse than 92.13% of 737 companies in the Medical Devices & Instruments industry. To learn more about Pacific Biosciences of California stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
