Cidara Therapeutics Inc (NASDAQ:CDTX), a biotechnology company based in United States, received a lot of attention from a substantial price increase on the NasdaqGM in the over the last few months. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Today I will analyse the most recent data on CDTX’s outlook and valuation to see if the opportunity still exists. Check out our latest analysis for Cidara Therapeutics
What’s the opportunity in CDTX?According to my relative valuation model, CDTX seems to be currently fairly priced. In this instance, I’ve used the price-to-book (PB) ratio given that there is not enough information to reliably forecast the stock’s cash flows, and its earnings doesn’t seem to reflect its true value. I find that CDTX’s ratio of 2.6x is trading slightly below its industry peers’ ratio of 3.7x, which means if you buy CDTX today, you’d be paying a relatively fair price for it. And if you believe that CDTX should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that CDTX’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of CDTX look like?Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Though in the case of CDTX, it is expected to deliver a negative earnings growth of -16.47%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? Currently, CDTX appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on CDTX, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on CDTX for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on CDTX should the price fluctuate below its true value.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Cidara Therapeutics. You can find everything you need to know about CDTX in the latest infographic research report. If you are no longer interested in Cidara Therapeutics, you can use our free platform to see my list of over 50 other stocks with a high growth potential.