Yahoo Finance Arcturus Therapeutics Holdings Stock Appears To Be Significantly Overvalued
- By GF Value
The stock of Arcturus Therapeutics Holdings (NAS:ARCT, 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 $27.23 per share and the market cap of $716.7 million, Arcturus Therapeutics Holdings stock shows every sign of being significantly overvalued. GF Value for Arcturus Therapeutics Holdings is shown in the chart below.
Because Arcturus Therapeutics Holdings 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. Arcturus Therapeutics Holdings has a cash-to-debt ratio of 22.31, which which ranks in the middle range of the companies in Biotechnology industry. The overall financial strength of Arcturus Therapeutics Holdings is 6 out of 10, which indicates that the financial strength of Arcturus Therapeutics Holdings is fair. This is the debt and cash of Arcturus Therapeutics Holdings 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. Arcturus Therapeutics Holdings has been profitable 0 years over the past 10 years. During the past 12 months, the company had revenues of $9.5 million and loss of $3.5 a share. Its operating margin of -749.81% worse than 69% of the companies in Biotechnology industry. Overall, GuruFocus ranks Arcturus Therapeutics Holdings's profitability as poor. This is the revenue and net income of Arcturus Therapeutics Holdings 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. Arcturus Therapeutics Holdings's 3-year average revenue growth rate is worse than 83% of the companies in Biotechnology industry. Arcturus Therapeutics Holdings's 3-year average EBITDA growth rate is -1.2%, which ranks in the middle range of the companies in Biotechnology industry.
Another way to look at the profitability of a company is to compare its return on invested capital and the weighted 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. We want to have the return on invested capital higher than the weighted cost of capital. For the past 12 months, Arcturus Therapeutics Holdings's return on invested capital is -321.56, and its cost of capital is 16.94. The historical ROIC vs WACC comparison of Arcturus Therapeutics Holdings is shown below:
In summary, Arcturus Therapeutics Holdings (NAS:ARCT, 30-year Financials) stock shows every sign 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 Arcturus Therapeutics Holdings stock, you can check out its 30-year Financials here.
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This article first appeared on GuruFocus.
