Amicus Therapeutics Stock Gives Every Indication Of Being Possible Value Trap
In This Article:
- By GF Value
The stock of Amicus Therapeutics (NAS:FOLD, 30-year Financials) gives every indication of being possible value trap, 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 $9.59 per share and the market cap of $2.6 billion, Amicus Therapeutics stock gives every indication of being possible value trap. GF Value for Amicus Therapeutics is shown in the chart below.
The reason we think that Amicus Therapeutics stock might be a value trap is because Amicus Therapeutics has an Altman Z-score of -0.69, which indicates that the financial condition of the company is in the distressed zone and implies a higher risk of bankruptcy. An Altman Z-score of above 2.99 would be better, indicating safe financial conditions. To learn more about how the Z-score measures the financial risk of the company, please go here.
Link: These companies may deliever higher future returns at reduced risk.
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. Amicus Therapeutics has a cash-to-debt ratio of 1.09, which is worse than 83% of the companies in Biotechnology industry. GuruFocus ranks the overall financial strength of Amicus Therapeutics at 4 out of 10, which indicates that the financial strength of Amicus Therapeutics is poor. This is the debt and cash of Amicus 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. Amicus Therapeutics has been profitable 0 over the past 10 years. Over the past twelve months, the company had a revenue of $260.9 million and loss of $1.07 a share. Its operating margin is -93.47%, which ranks in the middle range of the companies in Biotechnology industry. Overall, the profitability of Amicus Therapeutics is ranked 1 out of 10, which indicates poor profitability. This is the revenue and net income of Amicus Therapeutics over the past years: