Rating Update: Stock Rating F-Lowest (5/21/19)-REGENXBIO Inc (RGNX).

out_logo_500#72642.jpg

BUSINESS

REGENXBIO Inc., a clinical-stage biotechnology company, provides gene therapy product candidates to deliver genes to cells to address genetic defects or to enable cells in the body to produce therapeutic proteins that are intended to impact disease. Its gene therapy product candidates are based on NAV Technology Platform, a proprietary adeno-associated virus (AAV) gene delivery platform. The company’s lead product candidate is RGX-314 for the treatment of wet age-related macular degeneration. It is also developing RGX-501 for the treatment of homozygous familial hypercholesterolemia, which uses the AAV8 vector to deliver the human low-density lipoprotein receptor gene to liver cells; and RGX-111 to treat the neurological symptoms of Mucopolysaccharidosis Type I that uses the AAV9 vector to deliver the human a-l-iduronidase gene to the central nervous system (CNS).
out_plist#72642.jpg

INVESTMENT RATING

out_map1#72642.jpg

RGNX is expected to continue to be a major Value Eraser reflecting capital returns that are forecasted to be below the cost of capital.

REGENXBIO has a current Value Trend Rating of F (Lowest Rating).
With this rating, PTR’s two proprietary measures of a stock’s current attractiveness are providing highly consistent signals. REGENXBIO has a poor Power Rating of 15 and a very low Appreciation Score of 11, triggering the Lowest Value Trend Rating.

REGENXBIO’s stock is selling significantly above targeted value. The current stock price of $43.00 compares to targeted value 12 months forward of $17.
REGENXBIO’s very low appreciation potential results in an appreciation score of 11 (89% of the universe has greater appreciation potential.)
out_pt#72642.jpg

REGENXBIO has a Power Rating of 15. (RGNX’s poor Power Rating indicates that it only has a higher likelihood of achieving favorable investment performance over the near to intermediate term than 15% of companies in the universe.)
Factors contributing to this poor Power Rating include: is currently in an unfavorable positi; recent price action has been unfavorable; and earnings estimate behavior for RGNX has been slightly negative recently.

INVESTMENT PROFILE

REGENXBIO’s financial strength is exceptional. Financial strength rating is 96.
out_pfit1#72642.jpg

Relative to the S&P 500 Composite, REGENXBIO Inc has slightly more Value than Growth characteristics; its appeal is likely to be to Capital Gain-oriented investors; the perception is that RGNX is extremely low risk. Relative weaknesses include: low historical profitability, and low expected growth. REGENXBIO’s valuation is moderate: low dividend yield, moderate P/E ratio, and moderate price/book ratio. RGNX has unusually low market capitalization.

CURRENT SIGNALS

REGENXBIO’s current operations are eroding. Return on equity is falling, reflecting: declining pretax margin; and falling leverage.

REGENXBIO’s current technical position is very weak. The stock price is in a 1.4 month down move. The stock has declined 19.7% from its prior high. The stock price is below its 200 day moving average which is in a downtrend.

ALERTS

The stock is currently rated F.
REGENXBIO Inc (NASDAQ: RGNX) stock enjoyed a major increase of 12.0% on 5/21/19. The shares closed at $0.21. Moreover, trading volume in this advance was above average at 139% of normal. The stock has been weak relative to the market over the last nine months and has declined -2.0% during the last week.

CASH FLOW

In 2018, REGENXBIO generated a very significant increase in cash of +$158.98 million (+99%). Sources of cash were much larger than uses. Cash generated from 2018 EBITDA totalled +$92.12 million. Non-operating sources contributed +$15.97 million (+17% of EBITDA). Cash taxes consumed -$4.18 million (-5% of EBITDA). Re-investment in the business amounted to -$176.67 million (-192% of EBITDA). On a net basis, debt investors furnished +$5.85 million (+6% of EBITDA) while equity investors furnished +$225.88 million (+245% of EBITDA).
out_cflow.1#72642.jpg

REGENXBIO’s Non-operating Income, %EBITDA has exhibited a volatile overall uptrend over the period. This improvement was accompanied by stability for the Regenxbio Inc Peer Group. In most years, REGENXBIO was in the lower quartile. Currently, REGENXBIO is upper quartile at +17% of EBITDA (+$15.97 million).

REGENXBIO’s Cash Taxes, %EBITDA has experienced a small downtrend over the period. This downtrend was accompanied by stability for the Regenxbio Inc Peer Group. In most years, REGENXBIO was in the second quartile. Currently, REGENXBIO is substantially above median at -5% of EBITDA (-$4.18 million).

REGENXBIO’s Business Re-investment, %EBITDA has enjoyed a very strong overall uptrend over the period. This improvement was accompanied by a similar trend for the Regenxbio Inc Peer Group. (Since 2015 Business Re-investment, %EBITDA has experienced a very sharp decline.) In most years, REGENXBIO was in the lower quartile. Currently, REGENXBIO is lower quartile at -192% of EBITDA (-$176.67 million).

REGENXBIO’s Debt Investors, %EBITDA has experienced a very strong overall uptrend over the period. This improvement was accompanied by stability for the Regenxbio Inc Peer Group. In most years, REGENXBIO was in the top quartile. Currently, REGENXBIO is upper quartile at +6% of EBITDA (+$5.85 million).

REGENXBIO’s Equity Investors, %EBITDA has suffered a very strong overall downtrend over the period. This downtrend was accompanied by an opposite trend for the Regenxbio Inc Peer Group. In most years, REGENXBIO was in the top quartile. Currently, REGENXBIO is upper quartile at +245% of EBITDA (+$225.88 million).

REGENXBIO’s Change in Cash, %EBITDA has experienced a volatile overall uptrend over the period. This improvement was accompanied by a similar trend for the Regenxbio Inc Peer Group. In most years, REGENXBIO was in the top quartile. Currently, REGENXBIO is upper quartile at +173% of EBITDA (+$158.98 million).
out_cflow.2#72642.jpg

REGENXBIO’s Cash, %Revenue has enjoyed a volatile overall uptrend over the period. This improvement was accompanied by a similar trend for the Regenxbio Inc Peer Group. (Since 2015 Cash, %Revenue has experienced a very sharp decline.) In most years, REGENXBIO was in the top quartile. Currently, REGENXBIO is upper quartile at +146%.

PROFITABILITY

REGENXBIO’s return on equity has eroded very significantly since 2013.
The productivity of REGENXBIO’s assets declined over the full period 2009-2019: asset turnover has suffered a volatile overall downtrend.
out_dpgrfs3#72642.jpg

REGENXBIO’s return on equity is lower quartile (-7.5%) for the four quarters ended March, 2019.
out_dpgrfs3.2#72642.jpg
Operating performance (pretax return on assets) is lower quartile (-6.2%) reflecting asset turnover that is lower quartile (0.17X) and lower quartile pretax margin (-37.3%).
Tax “keep” rate (income tax management) is upper quartile (112.7%) resulting in after tax return on assets that is lower quartile.
Financial leverage (leverage) is lower quartile (1.07X).

GROWTH RATES

There are no significant differences between REGENXBIO’s longer term growth and growth in recent years.
REGENXBIO’s historical income statement and balance sheet growth are not available.

Annual revenue growth has been 64.6% per year.

Total asset growth has been 140.0% per year.

Annual E.P.S. growth is not available.

Equity growth has been 20.2% per year.
No consensus growth rate forecast is available for REGENXBIO.
out_growthgrf#72642.jpg

Relative to the Regenxbio Inc Peer Group, REGENXBIO’s historical growth measures are generally top quartile. Revenue growth (64.6%) has been upper quartile. Total asset growth (140.0%) has been upper quartile. Equity growth (20.2%) has been at the upper quartile. E.P.S. growth is unavailable.

Consensus growth forecast is unavailable.
out_growthgrf.2#72642.jpg

PRICE HISTORY

Over the full time period, REGENXBIO’s stock price performance has been variable and quite good. Between September, 2015 and May, 2019, REGENXBIO’s stock price rose +95%; relative to the market, this was a +31% gain. Significant price moves during the period: 1) January, 2018 – September, 2018: +182%; 2) June, 2016 – November, 2016: +178%; and 3) November, 2015 – June, 2016: -67%.
out_price#72642.jpg

TOTAL INVESTMENT RETURNS

Current annual total return performance of 34.9% is upper quartile relative to the S&P 500 Composite.
In addition to being upper quartile relative to S&P 500 Composite, current annual total return performance through April, 2019 of 34.9% is upper quartile relative to REGENXBIO Inc Peer Group.

Current 5-year total return performance is not available.
out_quartret#72642.jpg

VALUATION BENCHMARKS

Relative to S&P 500 Composite, RGNX’s overall valuation is exceptionally high. The highest factor, the ratio of enterprise value/revenue, is upper quartile. Ratio of enterprise value/assets is at the upper quartile. Price/equity ratio is slightly above median. Price/earnings ratio is unavailable. Ratio of enterprise value/earnings before interest and taxes is unavailable.
out_tradv#72642.jpg

REGENXBIO has a major value gap compared to the median valuation. For RGNX to achieve median valuation, its current ratio of enterprise value/revenue would have to fall from the current level of 14.92X to 4.11X. If RGNX’s ratio of enterprise value/revenue were to fall to 4.11X, its stock price would be lower by $-26 to $17.
For RGNX to fall to lower quartile valuation relative to the REGENXBIO Inc Peer Group, its current ratio of enterprise value/revenue would have to fall from the current level of 14.92X to 2.41X. If RGNX’s ratio of enterprise value/revenue were to fall to 2.41X, its stock price would decline by $-30 from the current level of $43.

VALUE TARGETS

RGNX is expected to continue to be a major Value Eraser reflecting capital returns that are forecasted to be below the cost of capital.
REGENXBIO’s current Price Target of $20 represents a -54% change from the current price of $43.00.
REGENXBIO’s very low appreciation potential results in an appreciation score of 11 (89% of the universe has greater appreciation potential.)
Reinforcing this low Appreciation Score of 11, the low Power Rating of 15 contributes to an Value Trend Rating of F.
out_vc#72642.jpg

REGENXBIO’s current Price Target is $20 (+57% from the 2018 Target of $13 but -54% from the 05/21/19 price of $43.00). This dramatic rise in the Target is the result of a +57% increase in the equity base and a +0% change in the price/equity multiple. None of the Value Drivers has an impact on the price/equity multiple. The forecasted increase in growth has no impact on the multiple. The forecasted increase in cost of equity also has no impact and the decline in return on equity didn’t either.
out_wc.1#72642.jpg
out_wc.2#72642.jpg

PTR’s return on equity forecast is -10.% — significantly below our recent forecasts. Forecasted return on equity erratic but little changed between 2013 and 2018. The current forecast is significantly below the 2013 low of 4%.

PTR’s growth forecast is 33.0% — substantially above our recent forecasts. Forecasted growth enjoyed a dramatic, erratic increase between 2013 and 2018. The current forecast is significantly above the 2016 low of 3%.

PTR’s cost of equity forecast is 9.0% — in line with recent levels. Forecasted cost of equity suffered a dramatic, variable increase between 2015 and 2018. The current forecast is above the 2016 low of 4.5%.
out_vc.2#72642.jpg
At REGENXBIO’s current price of $43.00, investors are placing a positive value of $66 on its future investments. This view is not supported by the company’s most recent performance that reflected a growth rate of 13.0% per year, and a return on equity of 4.0% versus a cost of equity of 8.7%.
PTR’s 2020 Price Target of $20 is based on these forecasts and reflects an estimated value of existing assets of $3 and a value of future investments of $17.

About John Lafferty 47332 Articles
During his career, John has developed valuation and stock rating methodologies, managed institutional portfolios and mutual funds, and provided equity research to institutional investors on thousands of companies. He has been Director of Research at PTR since its inception in 2004.

Be the first to comment

Leave a Reply

Your email address will not be published.


*


This site uses Akismet to reduce spam. Learn how your comment data is processed.