What Causes Fair Value Estimates to Change?

Image: A screenshot of the discounted cash-flow model learning tool for individual investors. By Brian Nelson, CFA If you’ve been a member of Valuentum for a while, you’ll notice that when we update a stock report, our estimate of a company’s fair value and the firm’s Valuentum Buying Index ratings can change. This is completely normal and should be expected (over time, companies generate cash and stock prices change). But sometimes the changes can be confusing, particularly if they are material (i.e. 10%, 20%, or more). In this article, let’s talk about why changes are standard operating procedure for investment research publishers. First, some background. Our estimate of a company’s fair value is driven by myriad factors. To derive a … Read more

FDA Accepts License Application for Vertex Pharma’s and CRISPR Therapeutics’ Key Investigational Treatment

  Image: Vertex’s pipeline is impressive. We like its areas of focus and the progress it continues to make with key therapies in CRISPR and pain management. By Brian Nelson, CFA On June 8, it was announced that the Biologics License Applications (BLAs) for the investigational treatment exagamglogene autotemcel (exa-cel) for sickle cell disease (SCD) and transfusion-dependent beta thalassemia (TDT) from two of our favorite speculative biotech entities Vertex Pharma (VRTX) and CRISPR Therapeutics (CRSP) have been accepted by the U.S. FDA. The submission received Priority Review for SCD, and exa-cel has the potential to be the first CRISPR gene-editing therapy to be approved. We continue to be huge fans of this technology and Vertex’s risk-adjusted exposure to the potential … Read more

We’ve Suspended Coverage of Stocks in the Disruptive Innovation Industry

Order the Exclusive publication here to gain access to idea generation that covers some of the most innovative stocks. As a member to the Exclusive publication, you’ll receive one income idea, one capital appreciation idea, and one short idea consideration each month! Order today >> — We’ve suspended coverage of stocks in the ‘Disruptive Innovation’ industry. The ‘Disruptive Innovation’ industry is unique in almost every way. The companies included don’t necessarily share a similar traditional industry or sector make-up, but they do share one big thing in common: They continue to disrupt the traditional way of doing things. Carvana is changing how consumers buy used cars, Roku is leading the streaming charge against linear TV, Teradyne’s industrial robotics technology is … Read more

Some Questions Answered: The Fair Value Estimate Range and ROIC

Q: In the 16-page stock reports, why doesn’t the ‘percentage undervalued / overvalued’ match up to the actual discount/premium to Valuentum’s fair value estimate of the company? A: We view the intrinsic value of a company as a Fair Value Range, not necessarily a single point estimate, so the undervalued and overvalued calculations match up to either the low fair value estimate or high fair value estimate, respectively. Within the context of a margin of safety, we wouldn’t necessarily view a company to be worth precisely $55 per share, for example; instead we’d view the company as worth between $50 (low end fair value estimate) and $60 per share (high end fair value estimate), with the low and high fair … Read more