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Orgenesis Stock Appears To Be Modestly Overvalued

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Jun 23, 2021
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The stock of Orgenesis (NAS:ORGS, 30-year Financials) gives every indication of being 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 $4.63 per share and the market cap of $113.3 million, Orgenesis stock is believed to be modestly overvalued. GF Value for Orgenesis is shown in the chart below.


Because Orgenesis is relatively overvalued, the long-term return of its stock is likely to be lower than its business growth.

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Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Thus, it is important to carefully review the financial strength of a company before deciding whether to buy its stock. Looking at the cash-to-debt ratio and interest coverage is a great starting point for understanding the financial strength of a company. Orgenesis has a cash-to-debt ratio of 3.26, which is worse than 69% of the companies in Biotechnology industry. GuruFocus ranks the overall financial strength of Orgenesis at 4 out of 10, which indicates that the financial strength of Orgenesis is poor. This is the debt and cash of Orgenesis 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. Orgenesis has been profitable 1 over the past 10 years. Over the past twelve months, the company had a revenue of $15.2 million and loss of $3.34 a share. Its operating margin is -586.74%, which ranks worse than 66% of the companies in Biotechnology industry. Overall, GuruFocus ranks the profitability of Orgenesis at 1 out of 10, which indicates poor profitability. This is the revenue and net income of Orgenesis 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 performance of a company’s stock. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Orgenesis is -29.8%, which ranks worse than 73% of the companies in Biotechnology industry. The 3-year average EBITDA growth rate is -63.2%, which ranks in the bottom 10% of the companies in Biotechnology 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, Orgenesis’s ROIC is -379.22 while its WACC came in at 6.98. The historical ROIC vs WACC comparison of Orgenesis is shown below:


In summary, Orgenesis (NAS:ORGS, 30-year Financials) stock shows every sign of being modestly overvalued. The company's financial condition is poor and its profitability is poor. Its growth ranks in the bottom 10% of the companies in Biotechnology industry. To learn more about Orgenesis stock, you can check out its 30-year Financials here.

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