Will Flora Growth (USA Stocks:FLGC) and Neptune Wellness (USA Stocks:NEPT) deliver in August?
 | By Aina Ster | Macroaxis Story |
Neptune Wellness Solutions (NEPT) is a healthcare company specializing in drug manufacturing. With a market capitalization of only $2.4M, the company is relatively small, but its low price to book ratio of 0.12X and price to sales ratio of 0.08X indicate that the stock may be undervalued. However, Neptune's financial health is a cause for concern. The company reported a significant net loss of **$84.4M** and a negative operating income of $88.5M. Its debt to equity ratio is low at 0.27%, but the probability of bankruptcy is alarmingly high at **96.00%**. The company's total revenue stands at $48.8M, but the cost of revenue is higher at $56.3M, resulting in a gross loss of $8.5M. The company's current liabilities stand at $18.39M, significantly higher than its cash and equivalents of $6.25M. Neptune's return on equity is also negative at -1.46, indicating that the company is not generating a profit for its shareholders. Despite these challenges, Neptune's shares are owned 9.76% by insiders and 32.65% by institutions, suggesting some level of confidence in the company's potential. The company's 52-week high is $3.7399, significantly higher than its current trading price, indicating potential for growth. However, investors should exercise caution due to the company's high risk of bankruptcy and its current financial struggles. While some millennials may be indifferent towards the personal products space, we will analyze the stability of Neptune Wellness's fundamentals in comparison to Flora Growth. We are going to dissect some of the competitive aspects of both Neptune Wellness and Flora Growth.
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Reviewed by Raphi Shpitalnik
Upon examining the fundamental indicators between Neptune Wellness and Flora, one can gauge the impact of market volatilities on the prices of both companies and assess if they can mitigate market risk when combined in a portfolio. Pair trading strategies can also be employed, such as aligning a long position in Flora with a short position in Neptune Wellness. For more details, please refer to our pair correlation module.
Let's commence with an analysis of the assets. The asset utilization indicator signifies the revenue generated for every dollar of assets reported by a company. Neptune Wellness has an asset utilization ratio of 46.49 percent, suggesting that the company generates $0.46 for each dollar of assets. A rising asset utilization ratio indicates that Neptune Wellness Solutions is enhancing its efficiency with each dollar of assets it uses for daily operations.
Extended review
Neptune Wellness Solutions (USA Stocks: NEPT) has shown some potential despite its current financial performance. The company has a market capitalization of just $2.4M, but with a substantial net asset value of $104.95M. This suggests that the company's stock may be undervalued, as indicated by its price to book ratio of 0.12X. However, the company has reported a net income loss of $84.4M, which is a concern for potential investors. On the positive side, Neptune has a healthy current ratio of 1.70X, indicating its ability to meet short-term obligations. The company also has a significant insider ownership of 9.76%, which could signal confidence in the company's future prospects. However, investors should also note the company's high beta of 2.13, which indicates a higher level of volatility compared to the market. Therefore, Neptune Wellness may offer potential gains for risk-tolerant investors, but it's crucial to carefully consider the company's financial health and market position. Investment perspective, in general, refers to a viewpoint or opinion regarding investment opportunity in Neptune Wellness. It encompasses the assessment of an investment's potential risks and rewards, and expectations for its performance over time. Several factors influence the investment perspective on Neptune Wellness, including investment goals, risk tolerance, time horizon, market conditions, and research and analysis. Investors have varying goals, such as capital preservation, income generation, or long-term growth. Risk tolerance plays a significant role in shaping an investor's perspective, with some being more risk-averse and others willing to take on higher risks for potential returns.
Watch out for price decline
Please consider monitoring Neptune Wellness on a daily basis if you are holding a position in it. Neptune Wellness is trading at a penny-stock level, and the possibility of delisting is much higher compared to other delisted stocks. However, just because the stock is trading under one dollar, does not mean it will be marked for deletion. Most exchanges require public instruments, such as Neptune Wellness stock to be traded above the $1 level to remain listed. If Neptune Wellness stock price falls below $1 for 30 consecutive trading days, the exchange can delist it. Once the company reaches this point, they will be sent an initial price violation notice directly from an exchange.
How important is Neptune Wellness's Liquidity
Neptune Wellness financial leverage refers to using borrowed capital as a funding source to finance Neptune Wellness Solutions ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Neptune Wellness financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to Neptune Wellness' owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Neptune Wellness' financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between Neptune Wellness's total debt and its cash.
Going after Neptune Financials
Neptune Wellness Solutions (NEPT) operates within the Drug Manufacturers-Specialty & Generic industry, a sector of the broader healthcare category. Despite a high beta of 2.13, indicating a high level of volatility, the company's risk-adjusted performance is -0.13, which suggests that the stock's returns have not adequately compensated for its risk levels. Furthermore, the company's market risk-adjusted performance is at -0.67, which is also concerning. The company's financial health appears strained with a current ratio of 1.70X, suggesting a potential liquidity problem. Its operating income shows a loss of $88.5M, and the net income applicable to common shares is also a loss of $75M. The company's total debt stands at $14.35M, which seems manageable considering its net assets of $104.95M. However, the probability of bankruptcy is alarmingly high at 96.00%. The stock's 52-week high and low are $3.74 and $0.11 respectively, and the current price-to-book ratio is a mere 0.12X, suggesting that the stock is potentially undervalued. However, with a negative quarterly revenue growth of -0.17 and a profit margin of -1.27, the company's profitability prospects appear bleak. Institutional ownership is at 32.65%, and insider ownership is at 9.76%, indicating a moderate level of confidence from these stakeholders. However, given the company's financial performance and risk profile, investors should approach Neptune Wellness Solutions with caution.
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