It hasn't been a great afternoon session for Exact Sciences investors, who have watched their shares sink by -1.6% to a price of $46.81. Some of you might be wondering if it's time to buy the dip. If you are considering this, make sure to check the company's fundamentals first to determine if the shares are fairly valued at today's prices.
Exact Sciences Has an Attractive P/B Ratio but a Worrisome P/E Ratio:
Exact Sciences Corporation provides cancer screening and diagnostic test products in the United States and internationally. The company belongs to the Health Care sector, which has an average price to earnings (P/E) ratio of 27.61 and an average price to book (P/B) ratio of 3.69. In contrast, Exact Sciences has a trailing 12 month P/E ratio of -35.7 and a P/B ratio of 2.75.
When we divide Exact Sciences's P/E ratio by its expected EPS growth rate of the next five years, we obtain its PEG ratio of -0.42. Since it's negative, the company has negative growth expectations, and most investors will probably avoid the stock unless it has an exceptionally low P/E and P/B ratio.
Negative Cash Flows:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $454 | $876 | $1,491 | $1,767 | $2,084 | $2,500 |
| Operating Margins | -35% | -27% | -51% | -48% | -28% | -9% |
| Net Margins | -39% | -24% | -55% | -34% | -30% | -8% |
| Net Income (M) | -$175 | -$213 | -$824 | -$596 | -$624 | -$204 |
| Net Interest Expense (M) | -$37 | -$62 | $68 | $19 | $20 | $19 |
| Depreciation & Amort. (M) | $20 | $16 | $93 | $95 | $97 | $92 |
| Diluted Shares (M) | 122 | 143 | 156 | 172 | 176 | 180 |
| Earnings Per Share | -$1.43 | -$1.62 | -$5.45 | -$3.48 | -$3.54 | -$1.13 |
| EPS Growth | n/a | -13.29% | -236.42% | 36.15% | -1.72% | 68.08% |
| Avg. Price | $59.17 | $97.06 | $92.23 | $112.2 | $62.55 | $46.81 |
| P/E Ratio | -41.38 | -59.91 | -16.92 | -32.24 | -17.67 | -41.42 |
| Free Cash Flow (M) | -$219 | -$284 | $71 | -$238 | -$438 | $32 |
| CAPEX (M) | $150 | $173 | $65 | $136 | $214 | $124 |
| Current Ratio | 9.02 | 2.34 | 3.47 | 2.76 | 2.38 | 2.32 |
Exact Sciences has an excellent current ratio of 2.32, rapidly growing revenues and decreasing reinvestment in the business, and positive EPS growth. However, the firm has negative cash flows. Finally, we note that Exact Sciences has weak operating margins with a positive growth rate.
