Biotechnology company ImmunityBio is standing out today, surging to $7.35 and marking a 43.8% change. In comparison the S&P 500 moved only 1.0%. IBRX is 47.0% above its average analyst target price of $5.0, which implies future downside for the stock.
Yet the average analyst rates it as buy, a surprinsingly upbeat outlook. Over the last year, ImmunityBio shares have outperformed the S&P 500 by 116.3%, with a price change of 138.6%.
ImmunityBio, Inc., a clinical-stage biotechnology company, engages in discovering, developing, and commercializing next-generation immuno- and cellular therapies for cancer and infectious diseases in the United States and Europe. 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.
ImmunityBio 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 $-0.45 and $-1.15. We can see that IBRX has a forward P/E ratio of -16.3 and a trailing P/E ratio of -6.4.
The P/E ratio is the company's share price divided by its earnings per share. In other words, it represents how much investors are willing to spend for each dollar of the company's earnings (revenues minus the cost of goods sold, taxes, and overhead). As of the first quarter of 2023, the health care sector has an average P/E ratio of 30.21, and the average for the S&P 500 is 15.97.
IBRX’s price to earnings ratio can be divided by its projected five-year growth rate, to give us the price to earnings, or PEG ratio. This allows us to put its earnings valuation in the context of its growth expectations which is useful because companies with low P/E ratios often have low growth, which means they actually do not present an attractive value.
When we perform the calculation for ImmunityBio, we obtain a PEG ratio of 4.42, which indicates that the company is overvalued compared to its growth prospects. The weakness with PEG ratios is that they rely on expected growth estimates, which of course may not turn out as expected.
ImmunityBio's financial viability can also be assessed through a review of its free cash flow trends. Free cash flow refers to the company's operating cash flows minus its capital expenditures, which are expenses related to the maintenance of fixed assets such as land, infrastructure, and equipment. Over the last four years, the trends have been as follows:
| Date Reported | Cash Flow from Operations ($ k) | Capital expenditures ($ k) | Free Cash Flow ($ k) | YoY Growth (%) |
|---|---|---|---|---|
| 2023 | -366,757 | 30,584 | -397,341 | 4.41 |
| 2022 | -337,509 | 78,162 | -415,671 | -34.97 |
| 2021 | -274,419 | 33,563 | -307,982 | -77.62 |
| 2020 | -171,724 | 1,669 | -173,393 | -10.87 |
| 2019 | -152,109 | 4,287 | -156,396 | -104.48 |
| 2018 | -63,381 | 13,102 | -76,483 |
- Average free cash flow: $-254544333.3
- Average free cash flown growth rate: -27.8 %
- Coefficient of variability (lower numbers indicating more stability): 0.0 %
If it weren't negative, the free cash flow would represent the amount of money available for reinvestment in the business, or for payments to equity investors in the form of a dividend. While a negative cash flow for one or two quarters is not a sign of financial troubles for IBRX, a long term trend of negative or highly erratic cash flow levels may indicate a struggling business or a mismanaged company.
ImmunityBio is by most measures overvalued because it has a negative P/E ratio., no published P/B ratio, and negative cash flows with a downwards trend. The stock has poor growth indicators because it has a no PEG ratio and weak operating margins with a positive growth rate. We hope you enjoyed this overview of IBRX's fundamentals.
