The stock of Adamis Pharmaceuticals (NAS:ADMP, 30-year Financials) is estimated to be modestly 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 $0.6918 per share and the market cap of $103 million, Adamis Pharmaceuticals stock shows every sign of being modestly overvalued. GF Value for Adamis Pharmaceuticals is shown in the chart below.
Because Adamis Pharmaceuticals is relatively overvalued, the long-term return of its stock is likely to be lower than 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. Adamis Pharmaceuticals has a cash-to-debt ratio of 1.00, which ranks in the middle range of the companies in Drug Manufacturers industry. Based on this, GuruFocus ranks Adamis Pharmaceuticals's financial strength as 2 out of 10, suggesting poor balance sheet. This is the debt and cash of Adamis Pharmaceuticals 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. Adamis Pharmaceuticals has been profitable 0 over the past 10 years. Over the past twelve months, the company had a revenue of $16.5 million and loss of $0.64 a share. Its operating margin is -225.25%, which ranks worse than 87% of the companies in Drug Manufacturers industry. Overall, the profitability of Adamis Pharmaceuticals is ranked 1 out of 10, which indicates poor profitability. This is the revenue and net income of Adamis Pharmaceuticals 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 Adamis Pharmaceuticals is -22.7%, which ranks in the bottom 10% of the companies in Drug Manufacturers industry. The 3-year average EBITDA growth rate is 9.6%, which ranks in the middle range of the companies in Drug Manufacturers industry.
One can also evaluate a company's profitability by comparing its return on invested capital (ROIC) to its weighted average 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 return on invested capital exceeds the weighted average cost of capital, the company is likely creating value for its shareholders. During the past 12 months, Adamis Pharmaceuticals's ROIC is -111.87 while its WACC came in at 9.81. The historical ROIC vs WACC comparison of Adamis Pharmaceuticals is shown below:
In conclusion, the stock of Adamis Pharmaceuticals (NAS:ADMP, 30-year Financials) appears to be modestly overvalued. The company's financial condition is poor and its profitability is poor. Its growth ranks in the middle range of the companies in Drug Manufacturers industry. To learn more about Adamis Pharmaceuticals stock, you can check out its 30-year Financials here.
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