The stock of Ascendis Pharma A/S (NAS:ASND, 30-year Financials) appears to be modestly undervalued, 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 $132.07 per share and the market cap of $7.1 billion, Ascendis Pharma A/S stock is estimated to be modestly undervalued. GF Value for Ascendis Pharma A/S is shown in the chart below.
Because Ascendis Pharma A/S is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth, which averaged 45.7% over the past five years.
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It is always important to check the financial strength of a company before buying its stock. Investing in companies with poor financial strength have a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage is a great way to understand the financial strength of a company. Ascendis Pharma A/S has a cash-to-debt ratio of 7.82, which is in the middle range of the companies in Biotechnology industry. The overall financial strength of Ascendis Pharma A/S is 6 out of 10, which indicates that the financial strength of Ascendis Pharma A/S is fair. This is the debt and cash of Ascendis Pharma A/S over the past years:
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Ascendis Pharma A/S has been profitable 2 over the past 10 years. Over the past twelve months, the company had a revenue of $8 million and loss of $9.61 a share. Its operating margin is -4809.41%, which ranks worse than 87% of the companies in Biotechnology industry. Overall, the profitability of Ascendis Pharma A/S is ranked 2 out of 10, which indicates poor profitability. This is the revenue and net income of Ascendis Pharma A/S over the past years:
One of the most important factors in the valuation of a company is growth. Long-term stock performance is closely correlated with growth according to GuruFocus research. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Ascendis Pharma A/S is 45.7%, which ranks better than 85% of the companies in Biotechnology industry. The 3-year average EBITDA growth is -31.1%, which ranks worse than 85% of the companies in Biotechnology industry.
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). 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. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Ascendis Pharma A/S's ROIC was -269.91, while its WACC came in at 3.91. The historical ROIC vs WACC comparison of Ascendis Pharma A/S is shown below:
In conclusion, the stock of Ascendis Pharma A/S (NAS:ASND, 30-year Financials) shows every sign of being modestly undervalued. The company's financial condition is fair and its profitability is poor. Its growth ranks worse than 85% of the companies in Biotechnology industry. To learn more about Ascendis Pharma A/S stock, you can check out its 30-year Financials here.
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