Pharmaceutical company Roivant Sciences is standing out today, surging to $12.53 and marking a 6.0% change. In comparison the S&P 500 moved only 0.0%. ROIV is -22.72% below its average analyst target price of $16.21, which implies there is more upside for the stock.
As such, the average analyst rates it at buy. Over the last year, Roivant Sciences shares have outperformed the S&P 500 by 6.5%, with a price change of 37.7%.
Roivant Sciences Ltd., a commercial-stage biopharmaceutical company, engages in the development and commercialization of medicines for inflammation and immunology areas. The company is part of the healthcare sector. Healthcare companies work in incredibly complex markets, and their valuations can change in an instant based on a denied drug approval, a research and development breakthrough at a competitor, or a new government regulation. In the longer term, healthcare companies are affected by factors as varied as demographics and epidemiology. Investors who want to understand the healthcare market should be prepared for deep dives into a wide range of topics.
Roivant Sciences has a trailing 12 month P/E of 2.3. Unlike its trailing EPS of $5.54, the company's forward EPS is negative at $-1.19 so they do not publish a forward P/E ratio. Calculating it ourselves, we see that ROIV has a forward P/E ratio of -10.5.
The P/E ratio is the company's share price divided by its earnings per share. In other words, it represents how much investors are willing to spend for each dollar of the company's earnings (revenues minus the cost of goods sold, taxes, and overhead). As of the third quarter of 2024, the health care sector has an average P/E ratio of 26.07, and the average for the S&P 500 is 29.3.
Roivant Sciences's financial viability can also be assessed through a review of its free cash flow trends. Free cash flow refers to the company's operating cash flows minus its capital expenditures, which are expenses related to the maintenance of fixed assets such as land, infrastructure, and equipment. Over the last four years, the trends have been as follows:
| Date Reported | Cash Flow from Operations ($ k) | Capital expenditures ($ k) | Free Cash Flow ($ k) | YoY Growth (%) |
|---|---|---|---|---|
| 2023 | -765,268 | 1,382 | -766,650 | 10.45 |
| 2022 | -843,393 | 12,690 | -856,083 | -23.15 |
| 2021 | -677,729 | 17,436 | -695,165 | -24.59 |
| 2020 | -552,138 | 5,806 | -557,944 |
- Average free cash flow: $-718960500.0
- Average free cash flown growth rate: -11.2 %
- 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 ROIV, a long term trend of negative or highly erratic cash flow levels may indicate a struggling business or a mismanaged company.
Value investors often analyze stocks through the lens of its Price to Book (P/B) Ratio (market value divided by book value). The book value refers to the present value of the company if the company were to sell off all of its assets and pay all of its debts today - a number whose value may differ significantly depending on the accounting method.
Roivant Sciences has a P/B ratio of 1.78. This indicates that the market value of the company exceeds its book value by a factor of more than 1, but is still below the average P/B ratio of the Health Care sector, which stood at 3.53 as of the third quarter of 2024.
Roivant Sciences is by most measures fairly valued because it has a Very low P/E ratio, a lower P/B ratio than its sector average, and negative cash flows with a downwards trend. The stock has mixed growth prospects because it has a a negative PEG ratio and strong operating margins with a unknown rate of growth. We hope you enjoyed this overview of ROIV's fundamentals.
