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Is J. B. Chemicals & Pharmaceuticals Limited’s(NSE:JBCHEPHARM) Recent Stock Performance Tethered To Its Strong Fundamentals?

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Most readers would already be aware that J. B. Chemicals & Pharmaceuticals’ (NSE:JBCHEPHARM) stock increased significantly by 20% over the past three months. Given the company’s impressive performance, we decided to study its financial indicators more closely as a company’s financial health over the long-term usually dictates market outcomes. In this article, we decided to focus on J. B. Chemicals & Pharmaceuticals’ ROE.

Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. In short, ROE shows the profit each dollar generates with respect to its shareholder investments.

See our latest analysis for J. B. Chemicals & Pharmaceuticals

How Is ROE Calculated?

The formula for ROE is:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ Equity

So, based on the above formula, the ROE for J. B. Chemicals & Pharmaceuticals is:

24% = ₹4.0b ÷ ₹16b (Based on the trailing twelve months to December 2020).

The ‘return’ is the profit over the last twelve months. So, this means that for every ₹1 of its shareholder’s investments, the company generates a profit of ₹0.24.

Why Is ROE Important For Earnings Growth?

So far, we’ve learned that ROE is a measure of a company’s profitability. Based on how much of its profits the company chooses to reinvest or “retain”, we are then able to evaluate a company’s future ability to generate profits. Generally speaking, other things being equal, firms with a high return on equity and profit retention, have a higher growth rate than firms that don’t share these attributes.

J. B. Chemicals & Pharmaceuticals’ Earnings Growth And 24% ROE

To begin with, J. B. Chemicals & Pharmaceuticals seems to have a respectable ROE. Further, the company’s ROE compares quite favorably to the industry average of 14%. This probably laid the ground for J. B. Chemicals & Pharmaceuticals’ moderate 18% net income growth seen over the past five years.

We then performed a comparison between J. B. Chemicals & Pharmaceuticals’ net income growth with the industry, which revealed that the company’s growth is similar to the average industry growth of 16% in the same period.

past-earnings-growth
NSEI:JBCHEPHARM Past Earnings Growth April 19th 2021

Earnings growth is an important metric to consider when valuing a stock. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. This then helps them determine if the stock is placed for a bright or bleak future. Is J. B. Chemicals & Pharmaceuticals fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is J. B. Chemicals & Pharmaceuticals Efficiently Re-investing Its Profits?

In J. B. Chemicals & Pharmaceuticals’ case, its respectable earnings growth can probably be explained by its low three-year median payout ratio of 21% (or a retention ratio of 79%), which suggests that the company is investing most of its profits to grow its business.

Additionally, J. B. Chemicals & Pharmaceuticals has paid dividends over a period of at least ten years which means that the company is pretty serious about sharing its profits with shareholders. Based on the latest analysts’ estimates, we found that the company’s future payout ratio over the next three years is expected to hold steady at 22%. Accordingly, forecasts suggest that J. B. Chemicals & Pharmaceuticals’ future ROE will be 22% which is again, similar to the current ROE.

Conclusion

Overall, we are quite pleased with J. B. Chemicals & Pharmaceuticals’ performance. In particular, it’s great to see that the company is investing heavily into its business and along with a high rate of return, that has resulted in a sizeable growth in its earnings. Having said that, the company’s earnings growth is expected to slow down, as forecasted in the current analyst estimates. To know more about the latest analysts predictions for the company, check out this visualization of analyst forecasts for the company.

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This article by Simply Wall St is general in nature. 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. Simply Wall St has no position in any stocks mentioned.
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Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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Pharmaceuticals

Enanta Pharmaceuticals (NASDAQ:ENTA) Stock Price Down 3.8% After Earnings Miss

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Enanta Pharmaceuticals, Inc. (NASDAQ:ENTA) dropped 3.8% on Friday after the company announced weaker than expected quarterly earnings. The company traded as low as $49.00 and last traded at $49.04. Approximately 2,777 shares changed hands during trading, a decline of 98% from the average daily volume of 142,041 shares. The stock had previously closed at $51.00.The biotechnology company reported ($1.09) earnings per share (EPS) for the quarter, missing the Thomson Reuters’ consensus estimate of ($0.94) by ($0.15). The business had revenue of $20.10 million for the quarter, compared to analysts’ expectations of $25.05 million. Enanta Pharmaceuticals had a negative return on equity of 3.75% and a negative net margin of 29.53%. The company’s revenue for the quarter was down 27.2% on a year-over-year basis. During the same period in the previous year, the business posted ($0.30) earnings per share.

A number of brokerages have issued reports on ENTA. JPMorgan Chase & Co. upgraded shares of Enanta Pharmaceuticals from an “underweight” rating to a “neutral” rating and lifted their target price for the stock from $44.00 to $55.00 in a research report on Friday, January 29th. Zacks Investment Research lowered shares of Enanta Pharmaceuticals from a “hold” rating to a “sell” rating in a research report on Tuesday, April 27th. Finally, Royal Bank of Canada boosted their price objective on shares of Enanta Pharmaceuticals from $47.00 to $53.00 and gave the company a “sector perform” rating in a research report on Tuesday, February 9th. Two analysts have rated the stock with a sell rating, three have given a hold rating and three have given a buy rating to the stock. Enanta Pharmaceuticals currently has a consensus rating of “Hold” and an average target price of $64.88.

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Institutional investors have recently added to or reduced their stakes in the stock. New York State Common Retirement Fund grew its holdings in Enanta Pharmaceuticals by 20.9% in the fourth quarter. New York State Common Retirement Fund now owns 37,898 shares of the biotechnology company’s stock valued at $1,596,000 after purchasing an additional 6,550 shares during the period. Tudor Investment Corp Et Al acquired a new stake in Enanta Pharmaceuticals in the fourth quarter valued at $1,856,000. Virtus ETF Advisers LLC raised its holdings in Enanta Pharmaceuticals by 18.9% in the fourth quarter. Virtus ETF Advisers LLC now owns 14,321 shares of the biotechnology company’s stock valued at $603,000 after acquiring an additional 2,275 shares in the last quarter. Credit Suisse AG raised its holdings in shares of Enanta Pharmaceuticals by 8.3% during the fourth quarter. Credit Suisse AG now owns 37,837 shares of the biotechnology company’s stock worth $1,594,000 after purchasing an additional 2,892 shares during the period. Finally, Rhumbline Advisers raised its holdings in shares of Enanta Pharmaceuticals by 9.6% during the fourth quarter. Rhumbline Advisers now owns 65,257 shares of the biotechnology company’s stock worth $2,747,000 after purchasing an additional 5,698 shares during the period. Hedge funds and other institutional investors own 90.78% of the company’s stock.

The company has a market capitalization of $988.43 million, a price-to-earnings ratio of -28.02 and a beta of 0.54. The stock’s fifty day simple moving average is $50.52 and its two-hundred day simple moving average is $47.52.

About Enanta Pharmaceuticals (NASDAQ:ENTA)

Enanta Pharmaceuticals, Inc, a biotechnology company, discovers and develops small molecule drugs for the treatment of viral infections and liver diseases. Its research and development disease targets include respiratory syncytial virus, non-alcoholic steatohepatitis, SARS-CoV-2, human metapneumovirus, and hepatitis B virus.

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This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest and most accurate reporting. This story was reviewed by MarketBeat’s editorial team prior to publication. Please send any questions or comments about this story to [email protected]

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7 Hotel Stocks Just Waiting For the Vaccine

Like any group of stocks related to travel and tourism, hotel stocks saw a steep drop in share prices in 2020. The leisure and hospitality sector that once had 15 million employees has lost 4 million jobs since February.

Many major cities will be feeling the ripple effects of the Covid-19 pandemic for years. However, there is ample evidence that shows the pandemic may be coming to an end. The number of new cases is dropping. The number of those getting vaccinated is rising. And even in the cities with the most restrictive mitigation measures, the slow process of reopening is beginning.

All of this can’t come fast enough for individuals who rely on the travel and tourism industry for their livelihood. Hotel chains had at least some revenue coming in the door. And when earnings season concludes, the more budget-friendly hotel chains may realize revenue that is 75% of its 2019 numbers. But that is not enough to bring the hotels to anywhere near full employment. Particularly with hotels that have bars and restaurants that have remained closed or open at limited capacity.

Many economists are optimistic that travel may begin to look more normal by the summer of this year. And the global economy may deliver 6.4% GDP growth this year. With that in mind, the hotel chains with the best fundamentals and the broadest footprint will be in the best position as the economy reopens.

View the “7 Hotel Stocks Just Waiting For the Vaccine”.

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Pharmaceuticals

BioCryst Pharmaceuticals Stock – GuruFocus.com

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The stock of BioCryst Pharmaceuticals (NAS:BCRX, 30-year Financials) shows every sign of being significantly overvalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus’ estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $13.12 per share and the market cap of $2.3 billion, BioCryst Pharmaceuticals stock is estimated to be significantly overvalued. GF Value for BioCryst Pharmaceuticals is shown in the chart below.

BioCryst Pharmaceuticals GF Value Chart

Because BioCryst Pharmaceuticals is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth.

Link: These companies may deliever higher future returns at reduced risk.

It is always important to check the financial strength of a company before buying its stock. Investing in companies with poor financial strength have a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage is a great way to understand the financial strength of a company. BioCryst Pharmaceuticals has a cash-to-debt ratio of 1.08, which is worse than 83% of the companies in Biotechnology industry. The overall financial strength of BioCryst Pharmaceuticals is 2 out of 10, which indicates that the financial strength of BioCryst Pharmaceuticals is poor. This is the debt and cash of BioCryst Pharmaceuticals over the past years:

debt and cash

Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. BioCryst Pharmaceuticals has been profitable 0 over the past 10 years. Over the past twelve months, the company had a revenue of $17.8 million and loss of $1.08 a share. Its operating margin is -981.12%, which ranks worse than 73% of the companies in Biotechnology industry. Overall, the profitability of BioCryst Pharmaceuticals is ranked 1 out of 10, which indicates poor profitability. This is the revenue and net income of BioCryst Pharmaceuticals over the past years:

Revnue and Net Income

Growth is probably one of the most important factors in the valuation of a company. GuruFocus’ research has found that growth is closely correlated with the long-term performance of a company’s stock. If a company’s business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Likewise, if a company’s revenue and earnings are declining, the value of the company will decrease. BioCryst Pharmaceuticals’s 3-year average revenue growth rate is worse than 73% of the companies in Biotechnology industry. BioCryst Pharmaceuticals’s 3-year average EBITDA growth rate is -14.4%, which ranks worse than 76% of the companies in Biotechnology industry.

Another way to look at the profitability of a company is to compare its return on invested capital and the weighted cost of capital. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. We want to have the return on invested capital higher than the weighted cost of capital. For the past 12 months, BioCryst Pharmaceuticals’s return on invested capital is -295.87, and its cost of capital is 17.87. The historical ROIC vs WACC comparison of BioCryst Pharmaceuticals is shown below:

ROIC vs WACC

Overall, the stock of BioCryst Pharmaceuticals (NAS:BCRX, 30-year Financials) is believed to be significantly overvalued. The company’s financial condition is poor and its profitability is poor. Its growth ranks worse than 76% of the companies in Biotechnology industry. To learn more about BioCryst Pharmaceuticals stock, you can check out its 30-year Financials here.

To find out the high quality companies that may deliever above average returns, please check out GuruFocus High Quality Low Capex Screener.

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Pharmaceuticals

Regeneron Pharmaceuticals Inc. stock falls Friday, underperforms market

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Shares of Regeneron Pharmaceuticals Inc.
REGN,
-0.39%

shed 0.39% to $496.75 Friday, on what proved to be an all-around positive trading session for the stock market, with the S&P 500 Index
SPX,
+0.74%

rising 0.74% to 4,232.60 and the Dow Jones Industrial Average
DJIA,
+0.66%

rising 0.66% to 34,777.76. Regeneron Pharmaceuticals Inc. closed $167.89 short of its 52-week high ($664.64), which the company reached on July 20th.

The stock underperformed when compared to some of its competitors Friday, as Johnson & Johnson
JNJ,
+0.45%

rose 0.45% to $168.50, Novartis AG ADR
NVS,
+0.70%

rose 0.70% to $87.96, and Amgen Inc.
AMGN,
+1.16%

rose 1.16% to $254.21. Trading volume (703,218) remained 165,258 below its 50-day average volume of 868,476.


Editor’s Note: This story was auto-generated by Automated Insights, an automation technology provider, using data from Dow Jones and FactSet. See our market data terms of use.

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