Yahoo Finance Aethlon Medical Stock Is Believed To Be Significantly Overvalued
- By GF Value
The stock of Aethlon Medical (NAS:AEMD, 30-year Financials) is believed 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 $10.79 per share and the market cap of $130.9 million, Aethlon Medical stock is believed to be significantly overvalued. GF Value for Aethlon Medical is shown in the chart below.
Because Aethlon Medical 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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Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to to understand its financial strength. Aethlon Medical has a cash-to-debt ratio of 178.41, which which ranks better than 85% of the companies in the industry of Medical Devices & Instruments. The overall financial strength of Aethlon Medical is 6 out of 10, which indicates that the financial strength of Aethlon Medical is fair. This is the debt and cash of Aethlon Medical 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. Aethlon Medical has been profitable 0 over the past 10 years. Over the past twelve months, the company had a revenue of $0.8 million and loss of $0.69 a share. Its operating margin is -890.63%, which ranks in the bottom 10% of the companies in the industry of Medical Devices & Instruments. Overall, the profitability of Aethlon Medical is ranked 1 out of 10, which indicates poor profitability. This is the revenue and net income of Aethlon Medical 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. Aethlon Medical's 3-year average revenue growth rate is in the bottom 10% of the companies in the industry of Medical Devices & Instruments. Aethlon Medical's 3-year average EBITDA growth rate is 48.5%, which ranks better than 84% of the companies in the industry of Medical Devices & Instruments.
Another method of determining the profitability of a company is to compare its return on invested capital to the weighted average cost of capital. 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. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Aethlon Medical's return on invested capital is -1165.83, and its cost of capital is 3.40. The historical ROIC vs WACC comparison of Aethlon Medical is shown below:
Overall, The stock of Aethlon Medical (NAS:AEMD, 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 84% of the companies in the industry of Medical Devices & Instruments. To learn more about Aethlon Medical stock, you can check out its 30-year Financials here.
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This article first appeared on GuruFocus.
