HALO Surges 0.9%. Let's Take a Closer Look at its Valuation.

Shares of Halozyme Therapeutics (HALO) jumped 0.9 % during today's morning session, bringing their 52 week performance to -2.0%. The stock seems to be overvalued in terms of traditional metrics, but in this day in age, we believe that a complete stock analysis should also take into account the company's strong growth indicators and mixed market sentiment.

Halozyme Therapeutics, Inc., a biopharma technology platform company, researches, develops, and commercializes proprietary enzymes and devices in the United States, Switzerland, Ireland, Belgium, Japan, and internationally. The mid-cap Health Care company is based in San Diego, United States and has 393 full time employees.

HALO's P/E Ratio Is Comparable to its Sector Average

Compared to the Health Care sector's average of 24.45, Halozyme Therapeutics has a trailing twelve month price to earnings (P/E) ratio of 23.5 and an expected P/E ratio of 11.2. P/E ratios are calculated by dividing the company's share price by either its trailing 12 month ($1.76) or forward earnings per share ($3.7).

Earnings is another term for the net profits left over after subtracting cost of goods sold, taxes, and operating costs from the company's recorded sales revenue. One way of looking at the P/E ratio is that it represents how much investors are willing to pay for every dollar's worth of the company's earnings. Since Halozyme Therapeutics's P/E ratio is near its sector average of 24.45, we can deduce that the market is fairly valuing the company's earnings.

Halozyme Therapeutics Is Fairly Valued in Terms of Expected Growth

Another factor pointing to Halozyme Therapeutics's value is its PEG ratio of 0.59. This is the stock's price to earnings ratio divided by its estimated earnings growth rate. If the resulting ratio is near or lower than 1 -- but higher than 0 -- its indicates that the company is faitly valued in terms of expected growth.

HALO Has an Alarming P/B Ratio

The price to book (P/B) ratio of a company is a comparison of the company's market capitalization versus its net asset, or book value. A ratio lower than 1 tells you that the equity market is undervaluing the book value of the company's assets, and ratios higher than 1 tell you that the equity markets are overvaluing the company in terms of its assets.

Of course, a company is worth much more than its assets alone, so the focus on P/B ratio is mainly to enable investors to single out undervalued securities that offer a margin of safety. Since Halozyme Therapeutics's P/B ratio of 36.14 is higher than its sector average of 4.16, such a margin of safety does not exist for the stock.

HALO's Weak Cash Flow Generation Is Troubling

The table below shows that Halozyme Therapeutics is not generating enough cash. A well run company will generally have cash flows that reflect the strength of its underlying business, and in Halozyme Therapeutics's case, free cash flow is growing at an average rate of 0.0% with a coefficient of variability of 250929468.8%. We can also see that cash flows from operations are evolving at a 0.0% rate, versus -0.0%:

Halozyme Therapeutics's Is a Profitable Business

If you are looking to make HALO a long term investment, it's essential that you understand the viability of its business through a study of its margins. Gross margins tell you how much the company makes in profit when only the costs directly related to producing the goods or delivering the service are taken into account. Operating margins, on the other hand, factor in overhead costs so they tell you how effectively Halozyme Therapeutics is run.

Halozyme Therapeutics's Gross Margins

Halozyme Therapeutics's Operating Margins

Halozyme Therapeutics's cost of revenue is growing at a rate of -0.0% in contrast to -11.9% for operating expenses. Sales revenues, on the other hand, have experienced a 0.0% growth rate. As a result, the average gross margins growth is -0.0 and the average operating margins growth rate is 7.7, with coefficients of variability of 7.4% and 268.5% respectively.

Halozyme Therapeutics Benefits From Positive Market Signals

The market sentiment regarding Halozyme Therapeutics is overwhelmingly positive. The stock has an average rating of buy and target prices ranging from $72.0 to $28.0. HALO is trading -20.12% away from its target price of $51.8. 6.1% of the company's shares are tied to short positions, and 96.6% of the shares are held by institutional investors.