The stock of Adaptimmune Therapeutics PLC (NAS:ADAP, 30-year Financials) appears to be significantly overvalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $4.03 per share and the market cap of $626.7 million, Adaptimmune Therapeutics PLC stock shows every sign of being significantly overvalued. GF Value for Adaptimmune Therapeutics PLC is shown in the chart below.
Because Adaptimmune Therapeutics PLC is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth.
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It is always important to check the financial strength of a company before buying its stock. Investing in companies with poor financial strength have a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage is a great way to understand the financial strength of a company. Adaptimmune Therapeutics PLC has a cash-to-debt ratio of 13.98, which is in the middle range of the companies in Biotechnology industry. The overall financial strength of Adaptimmune Therapeutics PLC is 5 out of 10, which indicates that the financial strength of Adaptimmune Therapeutics PLC is fair. This is the debt and cash of Adaptimmune Therapeutics PLC over the past years:
Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Typically, a company with high profit margins offers better performance potential than a company with low profit margins. Adaptimmune Therapeutics PLC has been profitable 0 years over the past 10 years. During the past 12 months, the company had revenues of $3.6 million and loss of $0.96 a share. Its operating margin of -3897.82% worse than 85% of the companies in Biotechnology industry. Overall, GuruFocus ranks Adaptimmune Therapeutics PLC’s profitability as poor. This is the revenue and net income of Adaptimmune Therapeutics PLC over the past years:
Growth is probably one of the most important factors in the valuation of a company. GuruFocus’ research has found that growth is closely correlated with the long-term performance of a company’s stock. If a company’s business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Likewise, if a company's revenue and earnings are declining, the value of the company will decrease. Adaptimmune Therapeutics PLC’s 3-year average revenue growth rate is worse than 85% of the companies in Biotechnology industry. Adaptimmune Therapeutics PLC’s 3-year average EBITDA growth rate is -1%, which ranks in the middle range of the companies in Biotechnology industry.
Another way to evaluate a company’s profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (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 is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Adaptimmune Therapeutics PLC’s ROIC was -230.21, while its WACC came in at 14.05. The historical ROIC vs WACC comparison of Adaptimmune Therapeutics PLC is shown below:
To conclude, Adaptimmune Therapeutics PLC (NAS:ADAP, 30-year Financials) stock gives every indication of being significantly overvalued. The company's financial condition is fair and its profitability is poor. Its growth ranks in the middle range of the companies in Biotechnology industry. To learn more about Adaptimmune Therapeutics PLC stock, you can check out its 30-year Financials here.
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