The stock of Navidea Biopharmaceuticals (AMEX:NAVB, 30-year Financials) is believed to be fairly valued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $1.98 per share and the market cap of $56.6 million, Navidea Biopharmaceuticals stock gives every indication of being fairly valued. GF Value for Navidea Biopharmaceuticals is shown in the chart below.
Because Navidea Biopharmaceuticals is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
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Since investing in companies with low financial strength could result in permanent capital loss, investors must carefully review a company's financial strength before deciding whether to buy shares. Looking at the cash-to-debt ratio and interest coverage can give a good initial perspective on the company's financial strength. Navidea Biopharmaceuticals has a cash-to-debt ratio of 2.00, which ranks worse than 73% of the companies in Biotechnology industry. Based on this, GuruFocus ranks Navidea Biopharmaceuticals's financial strength as 2 out of 10, suggesting poor balance sheet. This is the debt and cash of Navidea Biopharmaceuticals over the past years:
It poses less risk to invest in profitable companies, especially those that have demonstrated consistent profitability over the long term. A company with high profit margins is also typically a safer investment than one with low profit margins. Navidea Biopharmaceuticals has been profitable 2 over the past 10 years. Over the past twelve months, the company had a revenue of $0.9 million and loss of $0.48 a share. Its operating margin is -1171.99%, which ranks worse than 75% of the companies in Biotechnology industry. Overall, GuruFocus ranks the profitability of Navidea Biopharmaceuticals at 2 out of 10, which indicates poor profitability. This is the revenue and net income of Navidea Biopharmaceuticals over the past years:
Growth is probably one of the most important factors in the valuation of a company. GuruFocus' research has found that growth is closely correlated with the long-term performance of a company's stock. If a company's business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Likewise, if a company's revenue and earnings are declining, the value of the company will decrease. Navidea Biopharmaceuticals's 3-year average revenue growth rate is worse than 81% of the companies in Biotechnology industry. Navidea Biopharmaceuticals's 3-year average EBITDA growth rate is 35.3%, which ranks better than 80% of the companies in Biotechnology industry.
Another method of determining the profitability of a company is to compare its return on invested capital to the weighted average cost of capital. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Navidea Biopharmaceuticals's return on invested capital is -482.35, and its cost of capital is 15.38. The historical ROIC vs WACC comparison of Navidea Biopharmaceuticals is shown below:
To conclude, The stock of Navidea Biopharmaceuticals (AMEX:NAVB, 30-year Financials) is estimated to be fairly valued. The company's financial condition is poor and its profitability is poor. Its growth ranks better than 80% of the companies in Biotechnology industry. To learn more about Navidea Biopharmaceuticals stock, you can check out its 30-year Financials here.
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