Shareholders of Orphazyme AS (ORPH, Financial) and Itau Corpbanca (ITCB, Financial) have seen the value of their assets decline dramatically over the past couple of years, underperforming the S&P 500 index. Their profitability is not improving, and their financial conditions could be better, so there is not much to be positive about. Furthermore, sell-side analysts on Wall Street have issued lackluster ratings for these stocks.
Therefore, shareholders may want to consider reducing their holdings in these stocks, in my opinion.
Orphazyme AS is a Copenhagen, Denmark-based biotechnology developer of therapies for the treatment of neurodegenerative orphan diseases such as those caused by protein misfolding and aggregation, as well as lysosomal dysfunction.
Shares have declined by 19% over the past year, underperforming the S&P 500 by 60%.
Orphazyme AS does not pay dividends.
The balance sheet of the Danish biotech company has a Piotroski F-Score of 3 out of 9, which indicates poor business operations. According to the most recent financial report, the company has nearly $730 million in cash on hand and equivalents against total debt of $70.71 million. GuruFocus has rated the financial condition of the company with a score of 4 out of 10.
The profitability rating ranks extremely low as GuruFocus gives it a score of 1 out of 10. However, it must be said that being at the development stage, the business has yet to produce income from sales.
The share price traded at around $7.86 at close on June 29 for a market capitalization of $274.71 million and a 52-week range of $4.75 to $77.77.
The 14-day relative strength index of 49 indicates the stock is still trading far from oversold levels despite the sharp decline in the share price.
The company engages in a business which is not going to be easy from an economic standpoint, as there are many biotech companies that are working on treatments for neurodegenerative diseases and few are likely to succeed. Orphazyme only focuses on rare neurodegenerative diseases, which means that once a treatment has finally been developed and has all the clearance for its commercialization, it will have an extremely limited number of patients who will be in need for that.
On Wall Street, as of June, the stock has an underweight recommendation rating with an average target price of $8.59 per share.
Itau Corpbanca is a Santiago de Chile-based regional bank with operations in Chile and Colombia.
Shares have increased by only 6% over the past year and declined by 72% over the past three years through June 29, underperforming the S&P 500 by 35% and 130%, respectively.
Shareholders of Itau Corpbanca used to receive an annual cash dividend, with 43.2 cents per common share being paid in 2020. However, the bank will not distribute any dividends this year.
The balance sheet is not solid, mainly as a result of poor business operations, as the Piotroski F-Score of 3 out of 9 indicates. GuruFocus has assigned a financial strength rating of 2 out of 10 to the company.
With regard to its profitability, which scores only 4 out of 10, all the financial indicators such as net margin, return on equity and return on assets are negative, with the exception of the three-year revenue growth rate, which is 0.8%.
The share price traded at around $4.25 at close on June 29 for a market capitalization of $1.45 billion and a 52-week range of $3.63 to $7.38.
The 14-day relative strength index of 36 indicates the stock is not so far from oversold levels after the share price tumble.
Itau Corpbanca is serving individuals and small- and mid-tier businesses through a network of 294 branches and 533 ATMs operating across Chile and Colombia. Chile gives the larger contribution to total consolidated assets of the bank ($46 billion as of March 30), while Colombia adds the remaining 15%. Since in Chile there is a widespread use of credit, the risk of non-performing loans increased as Chilean households and businesses became more vulnerable as a result of the Covid-19 crisis.
The liquidity coverage ratio (LCR), a generic stress test aiming to make sure that banks hold suitable capital preservation against short-term liquidity turmoil, worsened significantly in the first quarter of 2021. It fell by 1,550 basis points to 179.5% with regard to Chile and by 1,080 basis points to 116.7% with regard to Colombia.
On Wall Street, as of June, the stock has an underperform recommendation rating.
Disclosure: I have no positions in any securities mentioned in this article.