ADMA Biologics Inc (NASDAQ:ADMA), a biotechnology company based in United States, received a lot of attention from a substantial price movement on the NasdaqCM in the over the last few months, increasing to $3.71 at one point, and dropping to the lows of $2.76. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether ADMA’s current trading price of $2.79 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at ADMA’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. See our latest analysis for ADMA
What is ADMA worth?
According to my relative valuation model, ADMA seems to be currently fairly priced. 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 ADMA’s ratio of 2.6x is trading slightly below its industry peers’ ratio of 4.4x, which means if you buy ADMA today, you’d be paying a relatively fair price for it. And if you believe that ADMA should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because ADMA’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, ADMA’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will ADMA generate?
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. ADMA’s earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? ADMA’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at ADMA? 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 tabs on ADMA, 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 ADMA, 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 ADMA Biologics. You can find everything you need to know about ADMA in the latest infographic research report. If you are no longer interested in ADMA Biologics, 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.