Biotechnology company Moderna is taking Wall Street by surprise today, falling to $33.98 and marking a -3.5% change compared to the S&P 500, which moved -1.0%. MRNA is -38.28% below its average analyst target price of $55.05, which implies there is more upside for the stock. However, the average analyst rating for the stock is hold -- a more pessimistic outlook than you might expect. Over the last year, Moderna has underperfomed the S&P 500 by -77.9%, moving -64.6%.
Moderna, Inc., a biotechnology company, provides messenger RNA medicines in the United States, Europe, and internationally. 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.
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 $-8.7 and $-9.28. We can see that MRNA has a forward P/E ratio of -3.9 and a trailing P/E ratio of -3.7. As of the third quarter of 2024, the average Price to Earnings (P/E) ratio for US health care companies is 26.07, and the S&P 500 has an average of 29.3. 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.
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 -54.3%.
Value investors often analyze stocks through the lens of its Price to Book (P/B) Ratio (its share price divided by its 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. Moderna's P/B ratio indicates that the market value of the company exceeds its book value by a factor of 1.2, 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.
Since it has a negative P/E ratio., a lower P/B ratio than its sector average, 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.
