When a company is dipping near it's 52 week low, it can mean a variety of things, one of which is that the company is poorly managed. But what if the company still has strong cash reserves? After all, having cash could fuel innovative R & D, strategic acquisitions, or long term investments, all of which could bring the stock price roaring back up. Today we focused on Biotech stocks that have taken a beating in the markets lately, but that still have cash in hand. We came up with a pretty interesting list - we hope you like it.
The Current ratio is a liquidity ratio used to determine a company's financial health. The metric illustrates how easily a firm can pay back its short obligations all at once through current assets. A company that has a current ratio of one or less is generally a liquidity red flag. Now this doesn't mean the company will go bankrupt tomorrow, but it also doesn't bode well for the company, and may indicate that it could have an issue paying back upcoming obligations.
The Quick ratio measures a company's ability to use its cash or assets to extinguish its current liabilities immediately. Quick assets include assets that presumably can be converted to cash at close to their book values. A company with a Quick Ratio of less than 1 cannot currently pay back its current liabilities. The quick ratio is more conservative than the Current Ratio because it excludes inventory from current assets, since some companies have difficulty turning their inventory into cash. If short-term obligations need to be paid off immediately, sometimes the current ratio would overestimate a company's short-term financial strength. In general, the higher the ratio, the greater the company's liquidity (i.e., the better able to meet current obligations using liquid assets).
We first looked for biotechnology stocks. We then looked for companies that are currently trading at no more than 10% above their 52-week lows. We then looked for companies with a large amount of cash on hand (Current Ratio>2)(Quick Ratio>2). We did not screen out any market caps.
Do you think these stocks are undervalued? Use our list to help with your own analysis.
1) Pacific Biosciences of California, Inc. (PACB)
Pacific Biosciences of California, Inc. has a trading above it's 52 Week Low by 6.82%, a Current Ratio of 8.93, and a Quick Ratio of 8.33. The short interest was 6.78% as of 06/14/2012. Pacific Biosciences of California, Inc., a development stage company, develops, manufactures, and markets an integrated platform for genetic analysis. The company engages in developing a technology platform that enables single molecule, real-time (SMRT) for the detection of biological processes. It primarily focuses on the deoxyribonucleic acid sequencing market.
2) Sequenom Inc. (SQNM)
Sequenom Inc. has a trading above it's 52 Week Low by 3.18%, a Current Ratio of 5.18, and a Quick Ratio of 4.89. The short interest was 25.30% as of 06/14/2012. Sequenom, Inc. provides products, services, diagnostic testing, applications, and genetic analysis products that translate the results of genomic science into solutions for biomedical research, translational research, molecular medicine applications, and agricultural and livestock research. The company operates in two segments, Molecular Diagnostics and Genetic Analysis. The Molecular Diagnostics segment researches, develops, and commercializes noninvasive molecular diagnostic tests for prenatal genetic disorders and diseases, women's health related disorders and diseases, ophthalmology, oncology, infectious diseases, and autoimmunity.
3) Emergent BioSolutions, Inc. (EBS)
Emergent BioSolutions, Inc. has a trading above it's 52 Week Low by 0.83%, a Current Ratio of 5.57, and a Quick Ratio of 5.17. The short interest was 4.13% as of 06/14/2012. Emergent BioSolutions, Inc., a biopharmaceutical company, engages in the development, manufacture, and commercialization of vaccines and therapeutics for use in defense and commercial markets to healthcare providers and purchasers in the United States and internationally. It markets BioThrax, a vaccine for the prevention of anthrax disease. The company's products also include BioThrax PEP, which is in Phase III clinical trials; PreviThrax ands Anthrivig that are in Phase II clinical trials; and NuThrax and Thravixa, which are in Phase I clinical trials for the treatment of Anthrax.
4) ShangPharma Corporation (SHP)
ShangPharma Corporation has a trading above it's 52 Week Low by 2.75%, a Current Ratio of 2.86, and a Quick Ratio of 2.74. The short interest was 0.02% as of 06/14/2012. ShangPharma Corporation, through its subsidiaries, operates as a pharmaceutical and biotechnology research and development outsourcing company. It offers various integrated services across the drug discovery and development process to international and Chinese pharmaceutical and biotechnology companies, and academic and research institutions. The company's services include discovery chemistry, discovery biology and preclinical development, pharmaceutical development, and biologics services.
*Company profiles were sourced from Finviz. Financial data was sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.