Many investors focus more on share price when considering stock but the true measure of a company’s value is in their market cap. The truth is per-share price of a stock does not truly convey value relative to other stocks. Per-share prices are always changing and each company has a different number of outstanding shares, so calculating the per-share price doesn’t give us a true analysis of worth. Let’s take a closer look…
Stock Price: $35
Outstanding Shares: 50 million
Market Cap: $35 x 50,000,000 = $1.75 billion
Stock Price: $10
Outstanding Shares: 200 million
Market Cap= $10 x 200,000,000 $2 billion
WHY SHOULD INVESTORS LOOK AT SMALL-CAP COMPANIES?
The above examples include mid-cap companies ($1 to $10 billion), so what about small-cap companies under $1 billion? It’s easier to double the sales of a $5 million company than a $10 billion company. Smaller companies are usually in growing industries, allowing them to easily change strategy according to market conditions. Additionally, smaller companies are usually run by a small group of managers who are motivated to increase shareholder value and market cap.
The best time to invest in a small-cap biotech company is prior to/during successful clinical trials. Propanc Biopharma, Inc. (PPCHD) is a development stage healthcare company focused on developing new cancer treatments for patients suffering from pancreatic and colorectal cancer. Together with their scientific and oncology consultants, they have developed a rational, composite formulation of anti-cancer compounds, which exert a number of effects designed to control or prevent tumors from recurring and spreading through the body. Their lead product, PRP, is making headlines across the world as it moves successfully from preclinical development to its First-In-Human study.
Currently, the market cap for PPCHD is $3.99 million with a per-share price of $1.30. The success of the anticipated First-In-Human study could put this company on the road toward mid- to large-cap status. It would be a huge payoff for investors investing now, while market cap is low, as PPCHD marches onto their successful First-In-Human study.
IN OTHER BIOTECH NEWS…
Insys Therapeutics (LNSY) opened at $11.06 and closed at $11.63 with a small-cap market cap of $848.38 million. This biotech company will launch its second pain medication drug, Syndros later this year.
Portola Pharmaceuticals Inc. (PTLA) opened at $42.04 and closed at $41.57 with a mid-cap market cap of $2.67 billion. They announced yesterday that clinical results from the Phase 2 study of cerdulatinib in patients with relapsed/refractory b-cell malignancies will be shared in an oral presentation at the International Conference on Malignant Lymphoma (ICML), which is taking place from June 14-17 in Lugano, Switzerland.
Albany Molecular Research, Inc. (AMRI) opened $17.90 and closed at $17.87 with a small-cap market cap $744.93 million. They reported yesterday their first quarter total revenue of $163.8 million, up 55% from 2016.
Corcept Therapeutics Incorporated (CORT) opened at $10.22 and closed at $9.90 with a mid-cap market cap of $1.12 billion. They announced earlier this month that presentations about hypercortisolism and mifepristone’s role in treating that disorder will be presented at the 26th Annual Congress of the American Association of Clinical Endocrinologists (AACE) being held at the Austin Convention Center in Austin, Texas.
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