NovoCure (NVCR) stock climbed 7.6 % this morning. According to our metrics, the company seems overvalued at today's prices. In the below analysis, we will put NovoCure's valuation in the context of its profitability and market sentiment, which are also strong drivers for share price.
NovoCure Limited, an oncology company, engages in the development, manufacture, and commercialization of tumor treating fields (TTFields) devices for the treatment of solid tumor cancers in the United States, Europe, the Middle East, Africa, Japan, and Greater China. The mid-cap Healthcare company is based in Saint Helier, Jersey and has 1,167 full time employees.
Compared to the Healthcare sector's average of 13.21, NovoCure has a trailing twelve month price to earnings (P/E) ratio of -133.0 and an expected P/E ratio of -79.4. The P/E ratios are calculated by dividing the company's share price by its trailing 12 month of $-0.57 or forward earnings per share of $-0.95. Since NovoCure's P/B ratio of 17.8 is higher than its sector average of 4.07, such a margin of safety does not exist for the stock.
Cash flow Overview
| Date Reported | Cash Flow from Operations ($) | Capital expenditures ($) | Free Cash Flow ($) | YoY Growth (%) |
|---|---|---|---|---|
| 2021-12-31 | 82,756,000.0 | -24,170,000.0 | 58,586,000.0 | -30.4 |
| 2020-12-31 | 99,148,000.0 | -14,968,000.0 | 84,180,000.0 | 421.72 |
| 2019-12-31 | 26,620,000.0 | -10,485,000.0 | 16,135,000.0 | 288.14 |
| 2018-12-31 | -1,865,000.0 | -6,711,000.0 | -8,576,000.0 | n/a |
NovoCure's Gross Margins
| Date Reported | Revenue ($) | Cost of Revenue ($) | Gross Margins (%) | YoY Growth (%) |
|---|---|---|---|---|
| 2021-12-31 | 535,031,000.0 | 114,238,000.0 | 78.65 | 0.14 |
| 2020-12-31 | 494,366,000.0 | 106,092,000.0 | 78.54 | 4.9 |
| 2019-12-31 | 351,318,000.0 | 88,279,000.0 | 74.87 | 10.31 |
| 2018-12-31 | 248,069,000.0 | 79,698,000.0 | 67.87 | n/a |
NovoCure's Operating Margins
| Date Reported | Total Revenue ($) | Operating Expenses ($) | Operating Margins (%) | YoY Growth (%) |
|---|---|---|---|---|
| 2021-12-31 | 535,031,000.0 | 578,725,000.0 | -8.17 | -231.14 |
| 2020-12-31 | 494,366,000.0 | 463,556,000.0 | 6.23 | 3764.71 |
| 2019-12-31 | 351,318,000.0 | 351,905,000.0 | -0.17 | 98.73 |
| 2018-12-31 | 248,069,000.0 | 281,391,000.0 | -13.43 | n/a |
NovoCure has an average rating of hold and target prices ranging from $200 to $42. At its current price of $75.39, the company is trading -15.65% away from its target price of $89.38. 10.3% of the company's shares are linked to short positions, and 80.7% of the shares are owned by institutional investors.
In conclusion, we see that NovoCure shares are overvalued with poor growth indicators and mixed market sentiment.
