Biotech companies have projects with very long time horizons, sometimes 10 years or more, and because of that some biotech firms operate for years before generating any cash. Therefore, one way to look for more reliable biotech firms is to find those with a history of generating cash.
We ran a screen on U.S. biotech firms for those that have seen significant growth in operating cash flow/common equity over the past 5 years, with the trailing-12-month ratio at least 10% higher than the 3-year average, which is at least 10% higher than the 5-year average.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.
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We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.
Do you think these companies will continue to generate cash? Use this list as a starting-off point for your own analysis.
List sorted by market cap.
1. Genomic Health Inc. (GHDX): Medical Laboratories & Research Industry. Market cap of $834.20M. TTM Operating cash flow/common equity at 0.28 vs. 3-year average at 0.08 and 5-year average at -0.04. The stock is a short squeeze candidate, with a short float at 8.93% (equivalent to 23.09 days of average volume). The stock has gained 115.91% over the last year.
2. Optimer Pharmaceuticals, Inc. (OPTR): Biotechnology Industry. Market cap of $558.05M. TTM Operating cash flow/common equity at 0.15 vs. 3-year average at -0.65 and 5-year average at -2.18. The stock is a short squeeze candidate, with a short float at 11.35% (equivalent to 6.15 days of average volume). The stock has gained 31.87% over the last year.
3. MAP Pharmaceuticals, Inc. (MAPP): Drug Manufacturers Industry. Market cap of $484.48M. TTM Operating cash flow/common equity at 0.08 vs. 3-year average at -1.13 and 5-year average at -1.79. This is a risky stock that is significantly more volatile than the overall market (beta = 3.11). The stock is a short squeeze candidate, with a short float at 5.15% (equivalent to 13.16 days of average volume). The stock has gained 22.61% over the last year.
4. DepoMed Inc. (DEPO): Drug Manufacturers Industry. Market cap of $469.08M. TTM Operating cash flow/common equity at 1.26 vs. 3-year average at 0.52 and 5-year average at -0.20. The stock is a short squeeze candidate, with a short float at 11.89% (equivalent to 7.43 days of average volume). The stock has had a couple of great days, gaining 6.85% over the last week.
*Operating cash flow/common equity sourced from Screener.co, all other data sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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