In This Article:
- By GF Value
The stock of BioDelivery Sciences International (NAS:BDSI, 30-year Financials) is estimated to be 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 $3.56 per share and the market cap of $350.9 million, BioDelivery Sciences International stock is believed to be possible value trap. GF Value for BioDelivery Sciences International is shown in the chart below.
The reason we think that BioDelivery Sciences International stock might be a value trap is because BioDelivery Sciences International has an Altman Z-score of 1.25, 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.
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. BioDelivery Sciences International has a cash-to-debt ratio of 1.48, which which ranks in the middle range of the companies in Drug Manufacturers industry. The overall financial strength of BioDelivery Sciences International is 5 out of 10, which indicates that the financial strength of BioDelivery Sciences International is fair. This is the debt and cash of BioDelivery Sciences International over the past years:
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. BioDelivery Sciences International has been profitable 3 over the past 10 years. Over the past twelve months, the company had a revenue of $159.2 million and earnings of $0.25 a share. Its operating margin is 21.63%, which ranks better than 87% of the companies in Drug Manufacturers industry. Overall, the profitability of BioDelivery Sciences International is ranked 4 out of 10, which indicates poor profitability. This is the revenue and net income of BioDelivery Sciences International over the past years: