ClearPoint Neuro Stock Gives Every Indication Of Being Significantly Overvalued

GuruFocus.com
·4 min read

- By GF Value

The stock of ClearPoint Neuro (NAS:CLPT, 30-year Financials) is estimated to be significantly 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 $21.58 per share and the market cap of $446.1 million, ClearPoint Neuro stock appears to be significantly overvalued. GF Value for ClearPoint Neuro is shown in the chart below.


ClearPoint Neuro Stock Gives Every Indication Of Being Significantly Overvalued
ClearPoint Neuro Stock Gives Every Indication Of Being Significantly Overvalued

Because ClearPoint Neuro is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth.

Link: These companies may deliever higher future returns at reduced risk.

Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to to understand its financial strength. ClearPoint Neuro has a cash-to-debt ratio of 0.83, which which ranks worse than 69% of the companies in the industry of Medical Devices & Instruments. The overall financial strength of ClearPoint Neuro is 4 out of 10, which indicates that the financial strength of ClearPoint Neuro is poor. This is the debt and cash of ClearPoint Neuro over the past years:

ClearPoint Neuro Stock Gives Every Indication Of Being Significantly Overvalued
ClearPoint Neuro Stock Gives Every Indication Of Being Significantly Overvalued

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. ClearPoint Neuro has been profitable 0 over the past 10 years. Over the past twelve months, the company had a revenue of $12.8 million and loss of $0.42 a share. Its operating margin is -48.48%, which ranks worse than 70% of the companies in the industry of Medical Devices & Instruments. Overall, GuruFocus ranks the profitability of ClearPoint Neuro at 1 out of 10, which indicates poor profitability. This is the revenue and net income of ClearPoint Neuro over the past years:

ClearPoint Neuro Stock Gives Every Indication Of Being Significantly Overvalued
ClearPoint Neuro Stock Gives Every Indication Of Being Significantly Overvalued

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 ClearPoint Neuro is -5.3%, which ranks worse than 73% of the companies in the industry of Medical Devices & Instruments. The 3-year average EBITDA growth is 27.7%, which ranks better than 73% of the companies in the industry of Medical Devices & Instruments.

Another method of determining the profitability of a company is to compare its return on invested capital to the weighted average cost of capital. 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. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, ClearPoint Neuro's return on invested capital is -106.22, and its cost of capital is 9.97. The historical ROIC vs WACC comparison of ClearPoint Neuro is shown below:

ClearPoint Neuro Stock Gives Every Indication Of Being Significantly Overvalued
ClearPoint Neuro Stock Gives Every Indication Of Being Significantly Overvalued

In summary, the stock of ClearPoint Neuro (NAS:CLPT, 30-year Financials) shows every sign of being significantly overvalued. The company's financial condition is poor and its profitability is poor. Its growth ranks better than 73% of the companies in the industry of Medical Devices & Instruments. To learn more about ClearPoint Neuro stock, you can check out its 30-year Financials here.

To find out the high quality companies that may deliever above average returns, please check out GuruFocus High Quality Low Capex Screener.

This article first appeared on GuruFocus.

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