Novavax; Zacks’ Bull of the Day Play

Novavax (NVAXSnapshot Report) saw its stock move higher as Ebola scares gripped the nation. Since then, concerns of drug prices being too high has hurt the entire industry and maybe disproportionately hurt shares of NVAX. Analysts have actually become more bullish on the stock and have raised The increases in earnings estimates have helped push the stock to a Zacks Rank #1 (Strong Buy) and today it is the Bull of the Day.Two Recent Quarters

The chart below shows that the company has been able to beat the Zacks Consensus Estimate in each of the last two quarters. Yes they were only beats of one cent, but the market really liked the results.

NVAX posted a loss of $0.10 in the March 2015 quarter with a revenue miss of $1M or 1.23% on the top line. The bottom line beat was enough to push investors to buy the stock, which rose 4.4% in the session following the release.

The following quarter saw a big beat on the top line, and the stock was off to the races. Along with the one cent beat on the bottom line (loss of $0.08 vs a loss of $0.09), the company posted revenues of $14M when the Zacks Consensus was calling for $10M. That topline beat made investors happy, and the result was a stock price that was higher by 28.3% in the session following the release. That was a big move and was just about the top for the stock.

Description

Novavax is a biotech that focuses on recombinant nanoparticle vaccines and adjuvants. The company produces its vaccines using its proprietary recombinant nanoparticle vaccine technology. Its product pipeline includes respiratory syncytial virus (RSV) vaccine candidates for elderly and maternal immunizations. The company was founded in 1987 and is headquartered in Gaithersburg, Maryland.

Valuation

The valuation for NVAX isn’t what you would find for most stocks. Biotechs are held to different standards as they generally have a long road of non-profitability ahead of them. That said, this one is showing some great growth numbers, or at least it has. The company saw revenues grow 47% in 2014 and the current expectation is calling for nearly 50% revenue growth this year.

Analysts don’t have that much visibility into 2016 for this company, so they are likely being a little conservative right now in projecting a year over year decrease of 12%.

The metrics we normally look to show a little premium for shares of NVAX. The price to book multiple of 5x is higher than the 3.5x multiple that the industry average sports. The price to sales multiple of 49x is awfully big, especially with contraction expected next year. The industry average for a price to sales multiple is 3.5x, so even at these lower levels, NVAX trades at a premium to that metric.

Chart

Zacks has developed a chart that helps investors see how earnings estimates have impacted the price of the stock over the last several years. We call this chart the price and consensus chart, and each color coded lines represents analyst estimates over a designated year. As estimates increase, the stock tends to follow. The Zacks Rank is impacted by earnings estimate increases, beats and incorporates the idea of analyst agreement and magnitude. As a Zacks Rank #1 (Strong Buy) we see that estimates are moving higher.

Follow Brian Bolan on twitter at @BBolan1

Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor in charge of the Zacks Stocks Under $10, an investor service , where he recommends the stocks in the portfolio.

Brian also runs the brand new Zacks Game Changers where he looks for stocks that are disrupting their industries and reaping big gains.

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