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Strategies & Market Trends : Shorting stocks: Broken stocks - Analysis
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To: tradermike_1999 who wrote (2505)3/19/2001 6:05:25 PM
From: Q.   of 2506
 
To value development stage companies, especially drug companies, the best ratio is market cap / cumulative R&D expenses. Typical ratios vary. If you think the drug prospects are lousy, it merits a ratio of 1 or less. If you think the prospects are exceptional compared to peer companies, it might get a ratio of 10 or more.

ADLR has a market cap of $466 M, while R&D expenses since inception are $33.6 M, so this stock has a ratio of about 14, which is a little on the high side.

I personally avoid these because I don't have any way of knowing whether the drug prospects are good. Unless, of course, the company looks like a scam, and then I'll short it.
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