The stock of Celldex Therapeutics (NAS:CLDX, 30-year Financials) gives every indication of being 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 $27.78 per share and the market cap of $1.1 billion, Celldex Therapeutics stock appears to be significantly overvalued. GF Value for Celldex Therapeutics is shown in the chart below.
Because Celldex Therapeutics 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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Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Thus, it is important to carefully review the financial strength of a company before deciding whether to buy its stock. Looking at the cash-to-debt ratio and interest coverage is a great starting point for understanding the financial strength of a company. Celldex Therapeutics has a cash-to-debt ratio of 56.15, which is better than 68% of the companies in Biotechnology industry. GuruFocus ranks the overall financial strength of Celldex Therapeutics at 6 out of 10, which indicates that the financial strength of Celldex Therapeutics is fair. This is the debt and cash of Celldex Therapeutics over the past years:
It is less risky to invest in profitable companies, especially those with consistent profitability over long term. A company with high profit margins is usually a safer investment than those with low profit margins. Celldex Therapeutics has been profitable 0 over the past 10 years. Over the past twelve months, the company had a revenue of $5.4 million and loss of $1.83 a share. Its operating margin is -988.02%, which ranks worse than 72% of the companies in Biotechnology industry. Overall, the profitability of Celldex Therapeutics is ranked 1 out of 10, which indicates poor profitability. This is the revenue and net income of Celldex Therapeutics over the past years:
One of the most important factors in the valuation of a company is growth. Long-term stock performance is closely correlated with growth according to GuruFocus research. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Celldex Therapeutics is -44.8%, which ranks worse than 80% of the companies in Biotechnology industry. The 3-year average EBITDA growth is 49.7%, which ranks better than 89% 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, Celldex Therapeutics’s ROIC was -99.59, while its WACC came in at 19.45. The historical ROIC vs WACC comparison of Celldex Therapeutics is shown below:
Overall, The stock of Celldex Therapeutics (NAS:CLDX, 30-year Financials) shows every sign of being significantly overvalued. The company's financial condition is fair and its profitability is poor. Its growth ranks better than 89% of the companies in Biotechnology industry. To learn more about Celldex Therapeutics stock, you can check out its 30-year Financials here.
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