Lantheus Shares Are Climbing Today - Are They Overvalued?

Lantheus (LNTH) stock climbed 2.1 % this morning. According to our metrics, the company seems overvalued at today's prices. In the below analysis, we will put Lantheus's valuation in the context of its poor growth indicators and mixed market sentiment, which are also strong drivers for share price.

Lantheus Holdings, Inc. develops, manufactures, and commercializes diagnostic and therapeutic products that assist clinicians in the diagnosis and treatment of heart, cancer, and other diseases worldwide. The mid-cap Health Care company is based in Bedford, United States and has 698 full time employees.

LNTH Has a Higher P/E Ratio Than the Sector Average

Compared to the Health Care sector's average of 24.45, Lantheus has a trailing twelve month price to earnings (P/E) ratio of 129.4 and an expected P/E ratio of 11.5. The P/E ratios are calculated by dividing the company's share price by its trailing 12 month of $0.54 or forward earnings per share of $6.09.

Earnings represent the net profits left over after subtracting costs 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 Lantheus's P/E ratio is higher than its sector average of 24.45, we can deduce that the market is overvaluing the company's earnings.

Lantheus Is Fairly Valued in Terms of Expected Growth

Another factor pointing to Lantheus's value is its PEG ratio of 0.32. 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.

LNTH 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 Lantheus's P/B ratio of 8.65 is higher than its sector average of 4.16, such a margin of safety does not exist for the stock.

LNTH's Weak Cash Flow Generation Is Troubling

The table below shows that Lantheus is not generating enough cash. A well run company will generally have cash flows that reflect the strength of its underlying business, and in Lantheus's case, free cash flow is growing at an average rate of 0.0% with a coefficient of variability of 109481115.7%. We can also see that cash flows from operations are evolving at a 0.0% rate, versus 0.0%:

Date Reported Cash Flow from Operations ($ k) Capital expenditures ($ k) Free Cash Flow ($ k) YoY Growth (%)
2023-02-23 281,781 -16,547 298,328 493.89
2022-02-24 53,916 3,683 50,233 74.0
2021-02-25 16,396 -12,474 28,870 -71.82
2020-02-25 80,384 -22,061 102,445 27.54
2019-02-20 61,193 -19,132 80,325 13.0
2018-02-26 54,777 -16,309 71,086

Lantheus Is Not a Profitable Business

If you are looking to make LNTH a long term investment, its weak margins may give you cause for concern. As you can see from the below, the company is generally losing money on each sale it makes. That being said, stock prices in the short term can be independent of a company's margins, and Lantheus's management may be able to make the business profitable in the future.

Lantheus's Gross Margins

Date Reported Revenue ($ k) Cost of Revenue ($ k) Gross Margins (%) YoY Growth (%)
2023-02-23 935,061 -353,358 62 40.91
2022-02-24 425,208 -237,513 44 7.32
2021-02-25 339,410 -200,649 41 -18.0
2020-02-25 347,337 -172,526 50 -1.96
2019-02-20 343,374 -168,489 51 4.08
2018-02-26 331,378 -169,243 49

Lantheus's Operating Margins

Date Reported Total Revenue ($ k) Operating Expenses ($ k) Operating Margins (%) YoY Growth (%)
2023-02-23 935,061 -545,508 4 122.22
2022-02-24 425,208 -263,783 -18 -1700.0
2021-02-25 339,410 -142,959 -1 -106.67
2020-02-25 347,337 -123,150 15 -21.05
2019-02-20 343,374 -110,397 19 18.75
2018-02-26 331,378 -110,282 16

Lantheus's cost of revenue is growing at a rate of -0.0% in contrast to -34.3% 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 0.1 and the average operating margins growth rate is -21.1, with coefficients of variability of 14.6% and 239.9% respectively.

Lantheus Benefits From Positive Market Signals

The market sentiment regarding Lantheus is overwhelmingly positive. The stock has an average rating of buy and target prices ranging from $130.0 to $110.0. LNTH is trading -41.61% away from its target price of $119.63. 9.6% of the company's shares are tied to short positions, and 100.9% of the shares are held by institutional investors.

Date Reported Holder Percentage Shares Value
2023-06-30 Blackrock Inc. 12% 8,066,562 $563,489,715
2023-06-30 Vanguard Group Inc 10% 7,182,982 $501,767,231
2023-06-30 Alliancebernstein L.P. 4% 2,655,559 $185,504,082
2023-06-30 State Street Corporation 3% 2,335,904 $163,174,581
2023-06-30 Price (T.Rowe) Associates Inc 2% 1,526,786 $106,653,641
2023-06-30 Geode Capital Management, LLC 2% 1,399,876 $97,788,342
2023-06-30 Dimensional Fund Advisors LP 2% 1,362,204 $95,156,764
2023-06-30 Farallon Capital Management Llc 2% 1,360,500 $95,037,732
2023-06-30 Invesco Ltd. 2% 1,311,854 $91,639,565
2023-06-30 Hood River Capital Management LLC 2% 1,174,616 $82,052,804
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.