Cytokinetics, Inc. – Value Analysis (NASDAQ:CYTK) : July 31, 2017

Capitalcube gives Cytokinetics, Inc. a score of 82.

Our analysis is based on comparing Cytokinetics, Inc. with the following peers – GTx, Inc., ARCA biopharma, Inc., Ligand Pharmaceuticals Incorporated, Trevena, Inc., Acorda Therapeutics, Inc., Eiger BioPharmaceuticals, Inc., Array BioPharma Inc., ArQule, Inc. and Amgen Inc. (GTXI-US, ABIO-US, LGND-US, TRVN-US, ACOR-US, EIGR-US, ARRY-US, ARQL-US and AMGN-US).

Investment Outlook

Cytokinetics, Inc. has a fundamental score of 82 and has a relative valuation of NEUTRAL.

Fundamental Score

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Company Overview

  • Considering peers, relative outperformance over the last year and the last month suggest a leading position.
  • It currently trades at a Price/Book ratio of (7.25).
  • CYTK-US outperforms its peers with a relatively high operating performance and the market also expects faster growth relative to its peers
  • CYTK-US has a successful operating model with relatively high net profit margins and asset turns.
  • The company’s year-on-year change in revenues and earnings are better than the median among its peer group.
  • Over the last five years, CYTK-US‘s return on assets has improved from median to better than the median among its peers, suggesting the company has found relative operating advantages.
  • Compared with the peers chosen, CYTK-US has had faster revenue growth in prior years and a current P/E ratio that suggests faster growth in the future suggesting superior growth expectations.
  • The company’s level of capital investment suggests it might be under-investing in a business with above median returns.
  • CYTK-US‘s operating performance may not allow it to raise additional debt.

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Leverage & Liquidity

CYTK-US would seem to have a hard time raising additional debt.

  • With debt at 25.92% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 22.01%), and relatively tight interest coverage level of 0.56x, CYTK-US would have a hard time raising much additional debt.
  • Of the 9 chosen peers for the company, only 7 of the stocks have an outstanding debt balance. Companies with no debt include GTXI-US and ABIO-US.

CYTK-US has moved to a relatively low liquidity from an Quick & Able profile at the recent year-end.

  • CYTK-US‘s interest coverage is greater than (but within one standard deviation of) its five-year average interest coverage of -4,850.47x.
  • The decrease in its interest coverage to 0.56x from 5.26x (in 2016) was also accompanied by a decrease in its peer median during this period to -0.01x from 4.47x.
  • CYTK-US‘s debt-EV is its highest relative to the last five years and compares to a low of 0% in 2014.
  • The increase in its debt-EV to 25.92% from 8.13% (in 2016) was also accompanied by an increase in its peer median during this period to 22.01% from 9.51%.
  • Relative to peers, debt-EV rose 5.29 percentage points (and is now higher than its peer median). Unlike the peer median, it is also above the 25% leverage benchmark.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
GTx, Inc. 0 3.94 No interest exp 999
ARCA biopharma, Inc. 0 7.88 No interest exp 999
Ligand Pharmaceuticals Incorporated 10.53 0.77 3.28 29.04
Trevena, Inc. 19.99 9.13 -56.25 -421.38
Acorda Therapeutics, Inc. 32.11 2.39 -0.59 6.4
Eiger BioPharmaceuticals, Inc. 24.03 12.09 -66.84 -279.22
Array BioPharma Inc. 9.11 3.47 -8.2 -70.39
ArQule, Inc. 27.46 5.33 -76.21 -325.34
Amgen Inc. 28.81 6.2 7.78 30.26
Cytokinetics, Incorporated 25.92 5.73 0.56 18.65
Peer Median 22.01 5.53 -0.02 12.52
Best In Class 9.11 12.09 No interest exp 999

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Company Profile

Cytokinetics, Inc. operates as a biopharmaceutical company, which focuses on the discovery and development of muscle activators as potential treatment for debilitating diseases. It conducts a Phase 2 clinical trials program for tirasemtiv, including a Phase 2b clinical trial in patients with ALS, known as BENEFIT-ALS (Blinded Evaluation of Neuromuscular Effects and Functional Improvement with Tirasemtiv in ALS). The company was founded on August 5, 1997 and is headquartered in South San Francisco, CA.

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