What Are the Fundamentals Of Arcus Biosciences (RCUS)?

Standing out among the Street's worst performers today is Arcus Biosciences, a biotechnology company whose shares slumped -29.3% to a price of $21.56, 52.96% below its average analyst target price of $45.83.

The average analyst rating for the stock is buy. RCUS lagged the S&P 500 index by -29.8% so far today and by -7.4% over the last year, returning -25.3%.

Arcus Biosciences, Inc., a clinical-stage biopharmaceutical company, develops and commercializes cancer therapies in the United States. The company is part of the healthcare sector. Healthcare companies work in incredibly complex markets, and their valuations can change in an instant based on a denied drug approval, a research and development breakthrough at a competitor, or a new government regulation. In the longer term, healthcare companies are affected by factors as varied as demographics and epidemiology. Investors who want to understand the healthcare market should be prepared for deep dives into a wide range of topics.

Arcus Biosciences has a trailing 12 month P/E of 18.1. Unlike its trailing Eps of $1.19, the company's forward Eps is negative at $-4.65 so they do not publish a forward P/E ratio. Calculating it ourselves, we see that RCUS has a forward P/E ratio of -4.6.

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.

To deepen our understanding of the company's finances, we should study the effect of its depreciation and capital expenditures on the company's bottom line. We can see the effect of these additional factors in Arcus Biosciences's free cash flow, which was $-282,249,000.00 as of its most recent annual report. Free cash flow represents the amount of money available for reinvestment in the business or for payments to equity investors in the form of a dividend. In RCUS's case the cash flow outlook is weak. It's average cash flow over the last 4 years has been $-74,065,000.00 and they've been growing at an average rate of -59.6%.

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. Arcus biosciences's P/B ratio indicates that the market value of the company exceeds its book value by a factor of 2.2, but is still below the average P/B ratio of the Healthcare sector, which stood at 4.07 as of the third quarter of 2022.

Since it has an inflated P/E ratio, a lower P/B ratio than the sector average, and an unconvincing cash flow history with a downwards trend, Arcus Biosciences is likely overvalued at today's prices. The company has poor growth indicators because of no published PEG ratio and no published profit margins with a unknown rate of growth. We hope you enjoyed this overview of RCUS's fundamentals. Be sure to check the numbers for yourself, especially focusing on their trends over the last few years.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.