Celsion Stock Is Estimated To Be Modestly Overvalued

GuruFocus.com
·4 min read

- By GF Value

The stock of Celsion (NAS:CLSN, 30-year Financials) shows every sign 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 $1.14 per share and the market cap of $98.7 million, Celsion stock appears to be modestly overvalued. GF Value for Celsion is shown in the chart below.


Celsion Stock Is Estimated To Be Modestly Overvalued
Celsion Stock Is Estimated To Be Modestly Overvalued

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

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

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. Celsion has a cash-to-debt ratio of 2.77, which ranks worse than 69% of the companies in Biotechnology industry. Based on this, GuruFocus ranks Celsion's financial strength as 2 out of 10, suggesting poor balance sheet. This is the debt and cash of Celsion over the past years:

Celsion Stock Is Estimated To Be Modestly Overvalued
Celsion Stock Is Estimated To Be Modestly Overvalued

Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Celsion has been profitable 0 over the past 10 years. Over the past twelve months, the company had a revenue of $0.5 million and loss of $0.67 a share. Its operating margin is -3697.40%, which ranks worse than 85% of the companies in Biotechnology industry. Overall, the profitability of Celsion is ranked 1 out of 10, which indicates poor profitability. This is the revenue and net income of Celsion over the past years:

Celsion Stock Is Estimated To Be Modestly Overvalued
Celsion Stock Is Estimated To Be Modestly Overvalued

Growth is probably one of the most important factors 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. If a company's business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Likewise, if a company's revenue and earnings are declining, the value of the company will decrease. Celsion's 3-year average revenue growth rate is worse than 78% of the companies in Biotechnology industry. Celsion's 3-year average EBITDA growth rate is 36.4%, which ranks better than 79% of the companies in Biotechnology industry.

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, Celsion's return on invested capital is -82.03, and its cost of capital is 15.49. The historical ROIC vs WACC comparison of Celsion is shown below:

Celsion Stock Is Estimated To Be Modestly Overvalued
Celsion Stock Is Estimated To Be Modestly Overvalued

In conclusion, The stock of Celsion (NAS:CLSN, 30-year Financials) gives every indication of being modestly overvalued. The company's financial condition is poor and its profitability is poor. Its growth ranks better than 79% of the companies in Biotechnology industry. To learn more about Celsion 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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