Have Investors Already Priced In Zosano Pharma Corporation's (NASDAQ:ZSAN) Growth?

Zosano Pharma Corporation (NASDAQ:ZSAN), a medical equipment company based in United States, led the NasdaqCM gainers with a relatively large price hike in the past couple of weeks. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today I will analyse the most recent data on Zosano Pharma’s outlook and valuation to see if the opportunity still exists. See our latest analysis for Zosano Pharma

Is Zosano Pharma still cheap?

Good news, investors! Zosano Pharma is still a bargain right now. I’ve used the price-to-book ratio in this instance because there’s not enough visibility to forecast its cash flows, and its earnings doesn’t seem to reflect its true value. The stock’s ratio of 1.03x is currently well-below the industry average of 3.76x, meaning that it is trading at a cheaper price relative to its peers. However, given that Zosano Pharma’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from Zosano Pharma?

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 Zosano Pharma, it is expected to deliver a highly negative earnings growth in the next few years, 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? Although ZSAN is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to ZSAN, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on ZSAN for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Zosano Pharma. You can find everything you need to know about Zosano Pharma in the latest infographic research report. If you are no longer interested in Zosano Pharma, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.