Biotechnology company Moderna is standing out today, surging to $32.57 and marking a 8.9% change. In comparison the S&P 500 moved only -0.0%. MRNA is -31.56% below its average analyst target price of $47.59, which implies there is more upside for the stock. However, the average analayst 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 85.9%, moving -74.2%.
Moderna, Inc., a biotechnology company, provides messenger RNA medicines 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 $-8.7 and $-8.73. We can see that MRNA has a forward P/E ratio of -3.7 and a trailing P/E ratio of -3.7.
As of the third quarter of 2024, the average Price to Earnings (P/E) ratio for US health care companies is 22.94, and the S&P 500 has an average of 29.3. The P/E ratio consists in the stock's share price divided by its earnings per share (EPS), representing how much investors are willing to spend for each dollar of the company's earnings. Earnings are the company's revenues minus the cost of goods sold, overhead, and taxes.
Moderna's financial viability can also be assessed through a review of its free cash flow trends. Free cash flow refers to the company's operating cash flows minus its capital expenditures, which are expenses related to the maintenance of fixed assets such as land, infrastructure, and equipment. Over the last four years, the trends have been as follows:
| Date Reported | Cash Flow from Operations ($ k) | Capital expenditures ($ k) | Free Cash Flow ($ k) | YoY Growth (%) |
|---|---|---|---|---|
| 2024 | -3,004,000 | 1,051,000 | -4,055,000 | -6.01 |
| 2023 | -3,118,000 | 707,000 | -3,825,000 | -183.5 |
| 2022 | 4,981,000 | 400,000 | 4,581,000 | -65.65 |
| 2021 | 13,620,000 | 284,000 | 13,336,000 | 580.76 |
| 2020 | 2,027,000 | 68,000 | 1,959,000 | 498.98 |
| 2019 | -459,000 | 32,000 | -491,000 |
- Average free cash flow: $1.92 Billion
- Average free cash flown growth rate: -14.4 %
- 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 MRNA, 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.
Moderna has a P/B ratio of 1.25. 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 3.19 as of the third quarter of 2024.
With a negative P/E ratio., a lower P/B ratio than its sector average, and positive cash flows with a downwards trend, we can conclude that Moderna is probably overvalued at current prices. The stock presents poor growth indicators because of its weak operating margins with a positive growth rate, and a negative PEG ratio.
