The stock of Soligenix (NAS:SNGX, 30-year Financials) appears to be significantly overvalued, 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 $1.44 per share and the market cap of $57.6 million, Soligenix stock shows every sign of being significantly overvalued. GF Value for Soligenix is shown in the chart below.
Because Soligenix is significantly overvalued, the long-term return of its stock is likely to be much lower than its future 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. Soligenix has a cash-to-debt ratio of 1.78, which ranks worse than 75% of the companies in Biotechnology industry. Based on this, GuruFocus ranks Soligenix's financial strength as 2 out of 10, suggesting poor balance sheet. This is the debt and cash of Soligenix over the past years:
It is less risky to invest in profitable companies, especially those with consistent profitability over long term. A company with high profit margins is usually a safer investment than those with low profit margins. Soligenix has been profitable 0 over the past 10 years. Over the past twelve months, the company had a revenue of $2.4 million and loss of $0.67 a share. Its operating margin is -787.58%, which ranks worse than 69% of the companies in Biotechnology industry. Overall, the profitability of Soligenix is ranked 1 out of 10, which indicates poor profitability. This is the revenue and net income of Soligenix over the past years:
Growth is probably the most important factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long term stock performance of a company. A faster growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of Soligenix is -54%, which ranks worse than 83% of the companies in Biotechnology industry. The 3-year average EBITDA growth rate is 18.2%, which ranks in the middle range 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, Soligenix's return on invested capital is -2010.29, and its cost of capital is 9.58. The historical ROIC vs WACC comparison of Soligenix is shown below:
In conclusion, the stock of Soligenix (NAS:SNGX, 30-year Financials) is estimated to be significantly overvalued. The company's financial condition is poor and its profitability is poor. Its growth ranks in the middle range of the companies in Biotechnology industry. To learn more about Soligenix stock, you can check out its 30-year Financials here.
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