Deciphera Pharmaceuticals Inc (DCPH, Financial) recently reported a daily gain of 5.06%, despite a 3-month loss of 11.45%. The company reported a Loss Per Share of 2.32. This raises the question: is Deciphera Pharmaceuticals stock modestly undervalued? In the following analysis, we delve into the company's valuation, financial strength, profitability, and growth to provide a comprehensive answer.
About Deciphera Pharmaceuticals
Deciphera Pharmaceuticals Inc is a biotechnology company specializing in the development and manufacture of kinase-inhibiting drugs for the treatment of cancers and immunological diseases. The company boasts a diverse pipeline of drug candidates, including three clinical-stage and two research-stage programs. Its leading drug candidate, DCC-2618, is designed to inhibit the full spectrum of mutant or amplified KIT and Pdgfra kinases that drive various cancers. Deciphera Pharmaceuticals operates primarily within the United States.
The company's stock is currently priced at $13.09, while the GF Value, our proprietary measure of its fair value, stands at $16.68.
Understanding GF Value
The GF Value represents the intrinsic value of a stock, calculated based on historical trading 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 stock's fair trading value. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if the stock price is significantly below the GF Value Line, it is undervalued, and its future return will likely be higher.
According to our valuation method, Deciphera Pharmaceuticals (DCPH, Financial) is modestly undervalued. Therefore, the long-term return of its stock is likely to be higher than its business growth.
Deciphera Pharmaceuticals' Financial Strength
Investing in companies with poor financial strength can lead to a high risk of permanent capital loss. To avoid this, it's crucial to review a company's financial strength before purchasing shares. Deciphera Pharmaceuticals has a cash-to-debt ratio of 11.95, ranking better than 76.44% of 1040 companies in the Drug Manufacturers industry. The overall financial strength of Deciphera Pharmaceuticals is 7 out of 10, indicating fair financial strength.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, generally poses less risk. Deciphera Pharmaceuticals has been profitable 0 over the past 10 years. Over the past twelve months, the company had revenue of $144.10 million and a Loss Per Share of $2.32. Its operating margin is -137.49%, ranking worse than 88.37% of 1032 companies in the Drug Manufacturers industry. Overall, Deciphera Pharmaceuticals' profitability ranks at 1 out of 10, indicating poor profitability.
Growth is a critical factor in a company's valuation. Deciphera Pharmaceuticals's 3-year average revenue growth rate is better than 93.46% of 917 companies in the Drug Manufacturers industry. Its 3-year average EBITDA growth rate is 18.9%, ranking better than 66.67% of 879 companies in the Drug Manufacturers industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) is another way to evaluate 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 all its security holders to finance its assets. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. During the past 12 months, Deciphera Pharmaceuticals' ROIC was -209.85 while its WACC came in at 2.36.
Conclusion
In conclusion, the stock of Deciphera Pharmaceuticals (DCPH, Financial) is estimated to be modestly undervalued. Although the company's financial condition is fair, its profitability is poor. However, its growth ranks better than 66.67% of 879 companies in the Drug Manufacturers industry. To learn more about Deciphera Pharmaceuticals stock, you can check out its 30-Year Financials here.
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