Pharmaceutical company Summit Therapeutics is standing out today, surging to $25.91 and marking a 8.9% change. In comparison the S&P 500 moved only -0.0%. SMMT is -24.83% below its average analyst target price of $34.47, which implies there is more upside for the stock.
As such, the average analyst rates it at buy. Over the last year, Summit Therapeutics shares have outperformed the S&P 500 by 73.7%, with a price change of 94.0%.
Summit Therapeutics Inc., a biopharmaceutical company, focuses on discovery, development, and commercialization of patient, physician, caregiver, and societal friendly medicinal therapies. 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.
Summit Therapeutics 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 $-0.38 and $-1.01. We can see that SMMT has a forward P/E ratio of -68.2 and a trailing P/E ratio of -25.7.
As of the third quarter of 2024, the average Price to Earnings (P/E) ratio for US health care companies is 22.94, and the S&P 500 has an average of 29.3. The P/E ratio consists in the stock's share price divided by its earnings per share (EPS), representing how much investors are willing to spend for each dollar of the company's earnings. Earnings are the company's revenues minus the cost of goods sold, overhead, and taxes.
Another key to assessing a company's health is to look at its free cash flow, which is calculated on the basis of its total cash flow from operating activities minus its capital expenditures. Capital expenditures are the costs of maintaining fixed assets such as land, buildings, and equipment. From Summit Therapeutics's last four annual reports, we are able to obtain the following rundown of its free cash flow:
| Date Reported | Cash Flow from Operations ($ k) | Capital expenditures ($ k) | Free Cash Flow ($ k) | YoY Growth (%) |
|---|---|---|---|---|
| 2024 | -142,106 | 139 | -142,245 | -85.0 |
| 2023 | -76,760 | 128 | -76,888 | -82.17 |
| 2022 | -41,582 | 624 | -42,206 | 42.1 |
| 2021 | -72,587 | 306 | -72,893 | -50.2 |
| 2020 | -48,111 | 421 | -48,532 | -37.63 |
| 2019 | -35,106 | 157 | -35,263 |
- Average free cash flow: $-69671166.7
- Average free cash flown growth rate: -32.2 %
- Coefficient of variability (the lower the better): 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 SMMT, 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.
Summit Therapeutics's P/B ratio indicates that the market value of the company exceeds its book value by a factor of 74, so the company's assets may be overvalued compared to the average P/B ratio of the Health Care sector, which stands at 3.19 as of the third quarter of 2024.
Summit Therapeutics is by most measures overvalued because it has a negative P/E ratio., a higher than Average P/B Ratio, and negative cash flows with a downwards trend. The stock has poor growth indicators because it has a a negative PEG ratio and no published profit margins with a unknown rate of growth. We hope you enjoyed this overview of SMMT's fundamentals.
