Pharmaceutical company Sarepta Therapeutics is taking Wall Street by surprise today, falling to $64.75 and marking a -8.0% change compared to the S&P 500, which moved 0.0%. SRPT is -61.33% below its average analyst target price of $167.44, which implies there is more upside for the stock.
As such, the average analyst rates it at buy. Over the last year, Sarepta Therapeutics has underperfomed the S&P 500 by -51.6%, moving -45.2%.
Sarepta Therapeutics, Inc., a commercial-stage biopharmaceutical company, focuses on the discovery and development of RNA-targeted therapeutics, gene therapies, and other genetic therapeutic modalities for the treatment of rare diseases. 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.
Sarepta Therapeutics's trailing 12 month P/E ratio is 27.7, based on its trailing EPS of $2.34. The company has a forward P/E ratio of 4.4 according to its forward EPS of $11.45 -- which is an estimate of what its earnings will look like in the next quarter. 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.
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 Sarepta Therapeutics's free cash flow, which was $-577099000 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 SRPT's case the cash flow outlook is weak. It's average cash flow over the last 4 years has been $-392596333.3 and they've been growing at an average rate of -5.1%.
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). Sarepta therapeutics's P/B ratio is 4.11 -- in other words, the market value of the company exceeds its book value by a factor of more than 4, so the company's assets may be overvalued compared to the average P/B ratio of the Health Care sector, which stands at 3.53 as of the third quarter of 2024.
Since it has an average P/E ratio, an average P/B ratio, and negative cash flows with a downwards trend, Sarepta Therapeutics is likely overvalued at today's prices. The company has mixed growth prospects because of an inflated PEG ratio and weak operating margins with a positive growth rate. We hope you enjoyed this overview of SRPT's fundamentals. Be sure to check the numbers for yourself, especially focusing on their trends over the last few years.
