Biotechnology company BioNTech is taking Wall Street by surprise today, falling to $133.22 and marking a -8.6% change. Many vaccine producers dropped today after U.S. President Joe Biden announced that the Coronavirus pandemic was over. BNTX is now -42.83% below its average analyst target price of $233.03, which implies there is the possibility of significant upside for the stock. As such, the average analyst rates it at buy. Over the last year, BioNTech SE has underperfomed the S&P 500 by -45.9%, moving -57.0%.
As of the third quarter of 2022, the average Price to Earnings (P/E) ratio for US healthcare companies is 13.21, and the S&P 500 has an average of 15.97. The P/E ratio consists in the stock's share price divided by its earnings per share (Eps), representing how much investors are willing to spend for each dollar of the company's earnings. Earnings are the company's revenues minus the cost of goods sold, overhead, and taxes.
Biontech's trailing 12 month P/E ratio is 2.9, based on its trailing Eps of $45.6. The company has a forward P/E ratio of 7.6 according to its forward Eps of $17.48 -- which is an estimate of what its earnings will look like in the next quarter.
Studying a company's earnings can give investors much more than just insight into its stock's valuation. By looking at earnings growth over time and comparing it to revenue growth, we can see the evolution of the company's profit margins, which we can then use to make inferences about the company's competitive advantage in its market.
Biontech se's year on year (YOY) quarterly earnings and revenues decreased at rates of -40.1% and -39.8% respectively. Since earnings are growing at a slower rate than revenue, the company's profit margins are shrinking as a result of increases in the their tax liabilities, decreasing product prices, an increase in overhead, or a rise of the cost of goods sold.
In contrast with earnings, gross profits are calculated on the basis of the company's cost of goods sold (i.e. cost of labor and materials only) subtracted from sales revenues. Significant gross profit margins shed light on how much freedom the company has in setting the prices of its products. A wider gross profit margin indicates that a company may have a competitive advantage, as it is free to keep its product prices high relative to their cost. In BNTX's case, the gross profit margins are 81.8%, which indicates that it potentially benefits from a sustained competitive advantage over its peers, allowing it to maintain highly profitable pricing structures.
Companies have many other costs and sources of income occurring outside of their core business. Everything from equipment depreciation, returns on capital investments, legal costs, income from intellectual property, and interest payments on debt factor into the company's ultimate profitability. We can see the effect of these additional factors in BioNTech's levered free cash flow of $6,898,962,432. This represents the amount of money that is available for reinvesting in the business, or paying out to investors in the form of a dividend. With a positive cash flow, BNTX is in a position to do either -- which can encourage more investors to place their capital in the company.
Value investors often analyze stocks through the lens of its Price to Book (P/B) Ratio (its share price divided by its book value). The book value refers to the present value of the company if the company were to sell off all of its assets and pay all of its debts today - a number whose value may differ significantly depending on the accounting method. BioNtech's P/B ratio indicates that the market value of the company exceeds its book value by a factor of 1.9, but is still below the average P/B ratio of the Healthcare sector, which stood at 4.07 as of the second quarter of 2022.
As of third quarter of 2022, BioNtech is likely undervalued because it has a very low P/E ratio, a lower P/B ratio than the sector average, strong cash flows, and large gross profit margins. We hope this preliminary analysis will encourage you to do your own research into BNTX's fundamental values -- especially their trends over the last few years, which provide the clearest picture of the company's valuation.
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