I understand what you are saying, but let me explain a problem with that kind of analysis.
I work for a "biotech" company. The company has yet to earn a profit, however, the stock has trended higher for quite some time. Even when the stock was not trending higher, it had a floor at about $15/share. The stock will never get back to that level because there have been developments along the way that have added "value" to the company, such as deals with big pharma for developing technologies, and stabilizing cash from stock offerings and convertible debt debentures. Of course these things need to be paid back, but for the stock to trade back down to old levels would be the equivalent of saying that no progress has been made during the past few years. However, if the progress which has been made does not pan out (everything fails in the clinic, etc), the stock will trade back down to a level which is commensurate with the amount of cash on hand. But, the amount of cash on hand is higher now than the old lows, so we should not trade down to those levels again. So, even though we burn more money than ever, and we do not operate at a profit (yet), the stock will trade at higher levels than old lows. There is no P/E ratio so that can not be a factor in determining the "value" of a company. |
