May 31, 2022
[4 min Read]
Cassava Sciences, Inc., a clinical stage biotechnology company, develops drugs for neurodegenerative diseases. Its lead therapeutic product candidate is simufilam, a small molecule drug, which is completed Phase 2b clinical trial; and investigational diagnostic product candidate is SavaDx, a blood-based biomarker/diagnostic to detect Alzheimer's disease. The company was formerly known as Pain Therapeutics, Inc. and changed its name to Cassava Sciences, Inc. in March 2019.
In order to undergo a comparable analysis (to determine SAVA stocks value), we need to first outline who SAVA's competitors are.
These competitors need to be publicly listed, have valid financial metrics/multiples, operate in a similar manner to SAVA, and have a market cap similar to SAVA (if possible).
By keeping this in mind, I found the following list of companies to be some of SAVA stocks closest competitors:
REPL, TMCI, IMVT, ESTA, ARQT, CGNT, OCGN, AMTI, KURA, CYTK
Cassava Stock jumped over 15% on May 31st, which set a new 2 month high. This was the largest jump in the SAVA stock since November, and it seems to have occured on no news. I will link an article that explins more about this jump here.
As part of their Q1 2022 earnings release, SAVA stated that they currently have 39.96M Shares Outstanding (weighted average), which is up 2000 shares (from 39.96M shares outstanding in Q4 2021). This is negligable and should not be of any concern for investors in the SAVA stock.
Furthermore, SAVA stock has up to 0 of shares that they can issue (thereby diluting SAVA's stock). This maximum dilution for the period would only have a dilutionary effect on SAVA of 0%, which is good to see as an investor.
Here is the current analyst rating distribution for SAVA. In total there are 19 SAVA stock analyst ratings.
Analyst Ratings have provided relatively strong indicators of future price movement, which is why they are used to determine if SAVA stock is a buy or sell.
Currently, we have 3 financial ratings that help investors get a general idea of a company's valuation. These 3 metrics include DCF, ROE, and P/E, which are very common in the investing/valuation climate.
Firstly, SAVA stock has a DCF rating of 5 - Very Strong. DCF ratings determine the value behind a company based on their financial projections, expectations, and discount rate (time value of money). This is one of the most used valuation models in the stock market, and thus a high level of importance should be associated with this rating. However, many people have posted their SAVA DCF's online, which show that SAVA is way overvalued so this rating is skewed.
Secondly, SAVA stock has an ROE rating of 3 - Neutral. SAVA's current ROE is -17.93%, which justifies their rank of 3 - Neutral. ROE shows us how good (or bad) a company is at using their shareholders funds to generate money (returns). ROE is most useful when compared against the industry average, which is currently -44.27%. SAVA's ROE is horrible and should be rated as a 2 (becasue they are better than their peers, otherwise it should be a 1).
Lastly, SAVA stock has a P/E rating of 1 - Very Weak. SAVA stock price to earnings ratio is currently -22.97 which justifies their rank of 1 - Very Weak. Price to Earnings is the most commonly found financial metric and is best used when comparing a company's p/e to the industry average. SAVA operates in the Biotechnology industry, which currently has an average P/E of -10.19.
Overall, based on the 3 previously mentioned fields, SAVA stock has been given a comprehensive rating of 3 - Neutral. This rating implies that they are somewhat healthy financially.
Overall, SAVA stock is undervalued and needs to experience a change in stock price of (an average of) -11.11% to be considered “at fair value”.
Overall, due to the overall stock rating of 3 - Neutral (Based off of DCF, ROE, and P/E), as well as the fact that a comparable analysis (P/E and P/B) found that SAVA was undervalued and need to experience a price change of -11.11% in order to be at their fair value, I have concluded the following:
I personally think that SAVA is a sell especially after their recent jump. I think some of the ranking/valuation methods in this analysis are overly positive due to the biotech space being so volatile and unhealthy financially. I personally would consider taking a bear position in SAVA before I would consider taking a bullish position.