- By GF Value
The stock of Reata Pharmaceuticals (NAS:RETA, 30-year Financials) appears 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 $85.06 per share and the market cap of $3.1 billion, Reata Pharmaceuticals stock appears to be significantly overvalued. GF Value for Reata Pharmaceuticals is shown in the chart below.
Because Reata Pharmaceuticals is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth.
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. Reata Pharmaceuticals has a cash-to-debt ratio of 10000.00, which is better than 100% of the companies in Biotechnology industry. GuruFocus ranks the overall financial strength of Reata Pharmaceuticals at 6 out of 10, which indicates that the financial strength of Reata Pharmaceuticals is fair. This is the debt and cash of Reata Pharmaceuticals 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. Reata Pharmaceuticals has been profitable 1 over the past 10 years. Over the past twelve months, the company had a revenue of $9 million and loss of $7.34 a share. Its operating margin is -2509.41%, which ranks worse than 82% of the companies in Biotechnology industry. Overall, the profitability of Reata Pharmaceuticals is ranked 1 out of 10, which indicates poor profitability. This is the revenue and net income of Reata Pharmaceuticals over the past years: