OPKO Health Inc (OPK, Financial) experienced a daily loss of -3.85%, and a 3-month loss of -12.5%, with a Loss Per Share of 0.27. Given these figures, one might wonder: is this stock fairly valued? This article aims to answer that question by delving into an in-depth valuation analysis of OPKO Health. Read on to discover how this stock fares in terms of its intrinsic value and future prospects.
A Snapshot of OPKO Health
OPKO Health Inc is a diversified biotechnology company with pharmaceutical and diagnostic development programs. Its diagnostics business includes a core genetic testing operation. The company also owns a specialty active pharmaceutical ingredients manufacturer in Israel and a holding company in Ireland. The bio-reference testing business of OPKO Health measures various health parameters, such as the functions of the heart, kidney, liver, thyroid, and other organs.
Understanding the GF Value
The GF Value is an estimation of a stock's intrinsic value, calculated based on historical multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line provides an overview of the fair trading value of a stock. If a stock's price is significantly above the GF Value Line, it is overvalued and may deliver poor future returns. Conversely, if the price is significantly below the GF Value Line, it is undervalued and may yield higher future returns.
For OPKO Health (OPK, Financial), the GF Value estimates the stock to be fairly valued at its current price of $1.5 per share. With a market cap of $1.20 billion, the long-term return of OPKO Health's stock is likely to be close to the rate of its business growth.
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Financial Strength of OPKO Health
Companies with poor financial strength pose a high risk of permanent capital loss to investors. To avoid this, it's crucial to review a company's financial strength before deciding to purchase shares. The cash-to-debt ratio and interest coverage are great ways to understand a company's financial strength. OPKO Health has a cash-to-debt ratio of 0.37, which ranks worse than 71.49% of 228 companies in the Medical Diagnostics & Research industry. The overall financial strength of OPKO Health is 5 out of 10, indicating fair financial strength.
Profitability and Growth of OPKO Health
Investing in profitable companies is less risky, especially those with consistent profitability over the long term. OPKO Health has been profitable 1 over the past 10 years. Over the past twelve months, the company had a revenue of $868.10 million and a Loss Per Share of $0.27. Its operating margin is -19.71%, which ranks worse than 59.39% of 229 companies in the Medical Diagnostics & Research industry. The overall profitability of OPKO Health is ranked 2 out of 10, indicating poor profitability.
The growth of a company is a crucial factor in its valuation. The 3-year average annual revenue growth rate of OPKO Health is -2.7%, ranking worse than 76.96% of 204 companies in the Medical Diagnostics & Research industry. The 3-year average EBITDA growth rate is -5.8%, which ranks worse than 71.96% of 189 companies in the same industry.
Comparing ROIC and WACC
Comparing a company's Return on Invested Capital (ROIC) and Weighted Average Cost of Capital (WACC) is another way to assess its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to finance its assets. For the past 12 months, OPKO Health's ROIC is -7.05, and its WACC is 11.88.
Conclusion
In conclusion, OPKO Health's stock is estimated to be fairly valued. The company's financial condition is fair, but its profitability is poor. Its growth ranks worse than 71.96% of 189 companies in the Medical Diagnostics & Research industry. To learn more about OPKO Health stock, you can check out its 30-Year Financials here.
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