Standing out among the Street's worst performers today is Guardant Health, a medical specialities company whose shares slumped -3.1% to a price of $94.78, not far from its average analyst target price of $96.55.
The average analyst rating for the stock is buy. GH underperformed the S&P 500 index by -1.0% during today's afternoon session, but outpaced it by 208.7% over the last year with a return of 223.9%.
Guardant Health, Inc., a precision oncology company, provides blood and tissue tests, and data sets in the United States 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.
Guardant Health 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 $-2.71 and $-3.22. We can see that GH has a forward P/E ratio of -35.0 and a trailing P/E ratio of -29.4. 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 22.94, and the average for the S&P 500 is 29.3.
When we subtract capital expenditures from operating cash flows, we are left with the company's free cash flow, which for Guardant Health was $-274943000 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 GH's case the cash flow outlook is weak. It's average cash flow over the last 4 years has been $-249555166.7 and they've been growing at an average rate of -33.1%.
Guardant Health is likely overvalued at today's prices because it has a negative P/E ratio., no published P/B ratio, and negative cash flows with a downwards trend. The stock has poor growth indicators because of its with a negative growth trend, and a negative PEG ratio. We hope this preliminary analysis will encourage you to do your own research into GH's fundamental values -- especially their trends over the last few years, which provide the clearest picture of the company's valuation.
