Pharmaceutical company Immunovant is taking Wall Street by surprise today, falling to $41.5 and marking a -3.0% change compared to the S&P 500, which moved 0.0%. IMVT is -17.38% below its average analyst target price of $50.23, which implies there is more upside for the stock.
As such, the average analyst rates it at buy. Over the last year, Immunovant shares have outstripped the S&P 500 by 107.6%, with a price change of 128.3%.
Immunovant, Inc., a clinical-stage biopharmaceutical company, develops monoclonal antibodies for the treatment of autoimmune diseases. The company is categorized within the healthcare sector. The catalysts that drive valuations in this sector are complex. From demographics, regulations, scientific breakthroughs, to the emergence of new diseases, healthcare companies see their prices swing on the basis of a variety of factors.
Immunovant does not publish either its forward or trailing P/E ratios because their values are negative -- meaning that each share of stock represents a net earnings loss. But we can calculate these P/E ratios anyways using the stocks forward and trailing (EPS) values of $-1.93 and $-1.96. We can see that IMVT has a forward P/E ratio of -21.5 and a trailing P/E ratio of -21.2. The P/E ratio is the company's share price divided by its earnings per share. In other words, it represents how much investors are willing to spend for each dollar of the company's earnings (revenues minus the cost of goods sold, taxes, and overhead). As of the first quarter of 2023, the health care sector has an average P/E ratio of 30.21, and the average for the S&P 500 is 15.97.
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 Immunovant's free cash flow, which was $-188390000 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 IMVT's case the cash flow outlook is weak. It's average cash flow over the last 4 years has been $-81368000.0 and they've been growing at an average rate of -50.7%.
Another valuation metric for analyzing a stock is its Price to Book (P/B) Ratio, which consists in its share price divided by its book value per share. The book value refers to the present liquidation value of the company, as if it sold all of its assets and paid off all debts). Immunovant's P/B ratio is 21.66 -- in other words, the market value of the company exceeds its book value by a factor of more than 21, so the company's assets may be overvalued compared to the average P/B ratio of the Health Care sector, which stands at 4.08 as of the first quarter of 2023.
Since it has a negative P/E ratio, an elevated P/B ratio, and negative cash flows with a downwards trend, Immunovant is likely overvalued at today's prices. The company has poor growth indicators because of no PEG ratio and no published profit margins with a unknown rate of growth. We hope you enjoyed this overview of IMVT's fundamentals. Be sure to check the numbers for yourself, especially focusing on their trends over the last few years.
