Strongbridge Biopharma plc (NASDAQ:SBBP), a pharmaceuticals, biotechnology and life sciences company based in United States, saw a significant share price rise of over 20% in the past couple of months on the NasdaqGS. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine SBBP’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. View our latest analysis for Strongbridge Biopharma
What's the opportunity in SBBP?
SBBP appears to be overvalued according to my relative valuation model. I’ve used the price-to-book ratio in this instance because there’s not enough visibility to forecast its cash flows, and its earnings doesn’t seem to reflect its true value. The stock’s ratio of 24.8x is currently well-above the industry average of 7.2x, meaning that it is trading at a more expensive price relative to its peers. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that SBBP’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of SBBP look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares.Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 73.60% over the next couple of years, the future seems bright for SBBP. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in SBBP’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe SBBP should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on SBBP for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for SBBP, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.