Standing out among the Street's worst performers today is Moderna, a biotechnology company whose shares slumped -21.0% to a price of $94.17, 31.94% below its average analyst target price of $138.36.
The average analyst rating for the stock is hold. MRNA lagged the S&P 500 index by -20.0% so far today and by -34.6% over the last year, returning -13.0%.
Moderna, Inc., a biotechnology company, discovers, develops, and commercializes messenger RNA therapeutics and vaccines for the treatment of infectious diseases, immuno-oncology, rare diseases, autoimmune, and cardiovascular diseases in the United States, Europe, and internationally. 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.
Moderna 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 $-5.98 and $-15.6. We can see that MRNA has a forward P/E ratio of -15.7 and a trailing P/E ratio of -6.0. As of the second quarter of 2024, the average Price to Earnings (P/E) ratio for US health care companies is 27.61, and the S&P 500 has an average of 28.21. The P/E ratio consists in the stock's share price divided by its earnings per share (EPS), representing how much investors are willing to spend for each dollar of the company's earnings. Earnings are the company's revenues minus the cost of goods sold, overhead, and taxes.
A significant limitation with the price to earnings analysis is that it doesn’t account for investors’ growth expectations in the company. For example, a company with a low P/E ratio may not actually be a good value if it has little growth potential. Conversely, companies with high P/E ratios may be fairly valued in terms of growth expectations.
When we divide Moderna's P/E ratio by its projected 5 year earnings growth rate, we see that it has a Price to Earnings Growth (PEG) ratio of 0.23. This tells us that the company is largely undervalued in terms of growth expectations -- but remember, these growth expectations could turn out to be wrong!
When we subtract capital expenditures from operating cash flows, we are left with the company's free cash flow, which for Moderna was $-3825000000 as of its last 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 MRNA's case the cash flow outlook is weak. It's average cash flow over the last 4 years has been $2.52 Billion and they've been growing at an average rate of -52.5%.
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). Moderna's P/B ratio indicates that the market value of the company exceeds its book value by a factor of 3.09, but is still below the average P/B ratio of the Health Care sector, which stood at 3.69 as of the second quarter of 2024.
Since it has a negative P/E ratio., an average P/B ratio, and positive cash flows with a downwards trend, Moderna is likely overvalued at today's prices. The company has poor growth indicators because of a negative PEG ratio and weak operating margins with a positive growth rate. We hope you enjoyed this overview of MRNA's fundamentals. Be sure to check the numbers for yourself, especially focusing on their trends over the last few years.
