This is a quick expansion on my previous post which can be found here:
https://investorshangout.com/post/view?id=5776910
Again, happy to hear corrections, opinions and feedback.
Preamble
Lots of completely unfounded assumptions here, not the least of which are:
- We cannot be certain leronlimab will be approved for COVID
- We have no idea how long the pandemic will last
- We have no idea how many Samsung orders will be placed per year
- We have no idea if a competing therapeutic will erode or destroy leronlimab’s market share
- We have no idea if or when an effective vaccine will be developed, manufactured, and fully-distributed
Those unknowns are challenging enough in terms of predicting a target price, but they make it especially difficult to use a P/E ratio to estimate an appropriate multiple. There are many limitation to using P/E ratios to value stocks, especially pre-revenue, or just-starting-revenue biotechs.
Moreover, P/E ratios assume a stable and recurring revenue stream and are commonly based on a trailing twelve month interval (TTM). Forward P/E ratios depend on forward-looking earnings guidance, which CytoDyn does not provide, for obvious reasons. And then there’s the ‘irrational exuberance’ factor – where solid metrics are thrown out the window and momentum takes over.
Anyway, with all of that having been said, here is a quick ‘blue sky’ expansion of my previous post.
Low End of Range
$15M of profit for every Samsung 1.2M vial delivery.
Assuming 100% profit and $15M of net income, and using the total authorized shares of 700M, each Samsung shipment represents $0.021 per share value.
Using a P/E multiple of 20, each Samsung shipment represents $0.429 per share stock price. Extending that out, 10-Samsung shipments per year represents $4.29 per share stock price.
Using a P/E multiple of 100, each Samsung shipment represents $2.143 per share stock price. Extending that out, 10-Samsung shipments per year represents $21.43 per share stock price.
High End of Range
$240M of profit for every Samsung 1.2M vial delivery.
Assuming 100% profit and $240M of net income, and using the total authorized shares of 700M, each Samsung shipment represents $0.343 per share value.
Using a P/E multiple of 20, each Samsung shipment represents $6.857 per share stock price. Extending that out, 10-Samsung shipments per year represents $68.57 per share stock price.
Using a P/E multiple of 100, each Samsung shipment represents $34.286 per share stock price. Extending that out, 10-Samsung shipments per year represents $342.86 per share stock price.
ICER Report Range
$1.290B of profit for every Samsung 1.2M vial delivery.
Assuming 100% profit and $1.290B of net income, and using the total authorized shares of 700M, each Samsung shipment represents $1.843 per share value.
Using a P/E multiple of 20, each Samsung shipment represents $36.857 per share stock price. Extending that out, 10-Samsung shipments per year represents $368.57 per share stock price.
Using a P/E multiple of 100, each Samsung shipment represents $184.286 per share stock price. Extending that out, 10-Samsung shipments per year represents $1,842.86 per share stock price.
Important Considerations
1. In the examples above, I am not suggesting the use of any particular P/E ratio. That is for you to decide.
2. Remember, we don’t know if COVID represents recurring income for CytoDyn, and if so, how long that income stream will last. A P/E ratio based on TTM assumes the next 12 months will see net income equal to the last 12 months. It's hard to apply a P/E ratio based on the previous year’s net income – if the pandemic ends and no more orders are placed for that indication.
3. If COVID net income does subside or end completely, we also don’t know if an alternative CytoDyn indication might be approved (likely at a much higher dose price) and fill the void left by COVID.
4. Lastly, for the record, the long-term average P/E for the S&P 500 is around 15, meaning that the stocks that make up the index collectively command a premium 15 times greater than their weighted average earnings.
https://investorshangout.com/post/view?id=5776910
Again, happy to hear corrections, opinions and feedback.
Preamble
Lots of completely unfounded assumptions here, not the least of which are:
- We cannot be certain leronlimab will be approved for COVID
- We have no idea how long the pandemic will last
- We have no idea how many Samsung orders will be placed per year
- We have no idea if a competing therapeutic will erode or destroy leronlimab’s market share
- We have no idea if or when an effective vaccine will be developed, manufactured, and fully-distributed
Those unknowns are challenging enough in terms of predicting a target price, but they make it especially difficult to use a P/E ratio to estimate an appropriate multiple. There are many limitation to using P/E ratios to value stocks, especially pre-revenue, or just-starting-revenue biotechs.
Moreover, P/E ratios assume a stable and recurring revenue stream and are commonly based on a trailing twelve month interval (TTM). Forward P/E ratios depend on forward-looking earnings guidance, which CytoDyn does not provide, for obvious reasons. And then there’s the ‘irrational exuberance’ factor – where solid metrics are thrown out the window and momentum takes over.
Anyway, with all of that having been said, here is a quick ‘blue sky’ expansion of my previous post.
Low End of Range
$15M of profit for every Samsung 1.2M vial delivery.
Assuming 100% profit and $15M of net income, and using the total authorized shares of 700M, each Samsung shipment represents $0.021 per share value.
Using a P/E multiple of 20, each Samsung shipment represents $0.429 per share stock price. Extending that out, 10-Samsung shipments per year represents $4.29 per share stock price.
Using a P/E multiple of 100, each Samsung shipment represents $2.143 per share stock price. Extending that out, 10-Samsung shipments per year represents $21.43 per share stock price.
High End of Range
$240M of profit for every Samsung 1.2M vial delivery.
Assuming 100% profit and $240M of net income, and using the total authorized shares of 700M, each Samsung shipment represents $0.343 per share value.
Using a P/E multiple of 20, each Samsung shipment represents $6.857 per share stock price. Extending that out, 10-Samsung shipments per year represents $68.57 per share stock price.
Using a P/E multiple of 100, each Samsung shipment represents $34.286 per share stock price. Extending that out, 10-Samsung shipments per year represents $342.86 per share stock price.
ICER Report Range
$1.290B of profit for every Samsung 1.2M vial delivery.
Assuming 100% profit and $1.290B of net income, and using the total authorized shares of 700M, each Samsung shipment represents $1.843 per share value.
Using a P/E multiple of 20, each Samsung shipment represents $36.857 per share stock price. Extending that out, 10-Samsung shipments per year represents $368.57 per share stock price.
Using a P/E multiple of 100, each Samsung shipment represents $184.286 per share stock price. Extending that out, 10-Samsung shipments per year represents $1,842.86 per share stock price.
Important Considerations
1. In the examples above, I am not suggesting the use of any particular P/E ratio. That is for you to decide.
2. Remember, we don’t know if COVID represents recurring income for CytoDyn, and if so, how long that income stream will last. A P/E ratio based on TTM assumes the next 12 months will see net income equal to the last 12 months. It's hard to apply a P/E ratio based on the previous year’s net income – if the pandemic ends and no more orders are placed for that indication.
3. If COVID net income does subside or end completely, we also don’t know if an alternative CytoDyn indication might be approved (likely at a much higher dose price) and fill the void left by COVID.
4. Lastly, for the record, the long-term average P/E for the S&P 500 is around 15, meaning that the stocks that make up the index collectively command a premium 15 times greater than their weighted average earnings.
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