Emergent BioSolutions Went From Biotech Darling To Dog In A Year
Cheapest Biotech Stock? Is Emergent BioSolutions the cheapest biotechnology stock in America after its recent sell-off from $114 to $29?
Emergent or EBS, IPO’d in 2006 and saw a stock price hit nearly $30 by 2008. The company has seen stellar growth the last 5 years from half a billion in revenue to nearly $2 billion in revenue. Furthermore, it has good employee ownership and the management has a history with EBS. In fact, the current CEO has been involved with the company since 1999. CEO turnover is one of the highest correlating data sets with poor stock performance.
Emergent was picked to create vaccines for the government contracted big pharma’s. However, a mistake at a plant caused the loss of their US contract.
Mistakes happen. Its not the end of the world. But, the stock has fallen about 80% in a year and now its a biotechnology stock with a multiple of 5x operating cash flow. As a result of the loss of market faith, the fundamentals have been immensely discounted.
A recent market note pointed to the stock trading below its future discounted cash flow:
Investors are betting on the stock losing more and more contracts. However, the opposite has occured. EBS went out and got a large Canadian contract to replace the lost US vaccine contract.
And on the recent earnings release the company touted its 2024 prospects. So you have large cash flows and future potential.
Of course every stock is just a gamble with a potential failure rate of 40-60%, but EBS at $30 per share seems to make the odds ever in the investor’s favor!