Pharmaceutical company Alnylam Pharmaceuticals is taking Wall Street by surprise today, falling to $260.02 and marking a -9.4% change compared to the S&P 500, which moved 0.0%. ALNY is -9.13% below its average analyst target price of $286.15, which implies there is more upside for the stock.
As such, the average analyst rates it at buy. Over the last year, Alnylam Pharmaceuticals shares have outstripped the S&P 500 by 18.8%, with a price change of 42.7%.
Alnylam Pharmaceuticals, Inc., a biopharmaceutical company, focuses on discovering, developing, and commercializing novel therapeutics based on ribonucleic acid interference. 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.
Alnylam Pharmaceuticals 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 $-1.63 and $-0.57. We can see that ALNY has a forward P/E ratio of -159.5 and a trailing P/E ratio of -456.2. 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 second quarter of 2024, the health care sector has an average P/E ratio of 27.61, and the average for the S&P 500 is 28.21.
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 Alnylam Pharmaceuticals'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 0.63. 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!
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 Alnylam Pharmaceuticals's free cash flow, which was $41.94 Million 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 ALNY's case the cash flow outlook is weak. It's average cash flow over the last 4 years has been $-513810166.7 and they've been growing at an average rate of 1.5%.
Alnylam Pharmaceuticals is likely overvalued at today's prices because it has a negative P/E ratio., no published P/B ratio, and negative cash flows with a flat trend. The stock has poor growth indicators because of its weak operating margins with a positive growth rate, and no PEG ratio. We hope this preliminary analysis will encourage you to do your own research into ALNY's fundamental values -- especially their trends over the last few years, which provide the clearest picture of the company's valuation.
