What are the odds of Liminal (USA Stocks:LMNL) to slide in August?
 | By Aina Ster | Macroaxis Story |
Liminal BioSciences (NASDAQ: LMNL), a key player in the Biotechnology & Medical Research industry, has been exhibiting significant volatility, raising concerns about a potential dip in August. The company's valuation metrics reveal a slight discrepancy between the market value of $8.36 and the real value of $8.32, suggesting a potential overvaluation. The analyst consensus, based on a single estimate, holds the stock at a target price of $7.5, indicating a possible downside from the current market value. However, the naive expected forecast value stands at $9.33, suggesting a potential upside. The stock's possible upside price is estimated at a robust $14.8, while the possible downside price is $3.87. Despite the company's fiscal year ending in December, investors should consider the volatility and potential for loss before making investment decisions. The stock's highest and lowest estimated target price both stand at $7.5, reinforcing the analyst consensus of a 'Hold'. The potential for a dip in August is evident, and investors should exercise caution. Approximately 47% of stocks exhibit less volatility than Liminal BioSciences, and it is projected that 91% of all traded equity instruments will yield higher returns than the company over a 90-day investment horizon. Given the enthusiasm many adventurous traders have for the biotechnology sector, it is prudent to highlight the risks associated with shorting Liminal BioSciences, particularly in light of its recent volatility spike. We will examine the reasons why this could be a unique year for Liminal BioSciences shareholders.
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Reviewed by Raphi Shpitalnik
Liminal BioSciences currently holds $1.49 million in liabilities with a Debt to Equity (D/E) ratio of 1.31. This ratio is approximately average when compared to similar companies. The company has a current ratio of 2.3, suggesting that it is sufficiently liquid and can meet its financial obligations when they are due.
Debt can be beneficial for Liminal BioSciences until the company faces difficulty in paying it off, either with new capital or with free cash flow. There is a risk that Liminal BioSciences' shareholders could end up with nothing if the company fails to meet its legal obligations to repay its debt. However, a more common scenario is for companies like Liminal BioSciences to issue additional shares at discounted prices, thereby diluting the value for existing shareholders. In this context, debt can be an excellent tool for Liminal BioSciences to invest in growth at high rates of return. When considering Liminal BioSciences' use of debt, it should always be evaluated in conjunction with cash and equity.
On a scale of 0 to 100, Liminal BioSciences has a performance score of 7. The company has a Beta (Market Risk) of 0.3067, which suggests potential diversification benefits within a given portfolio. In this case, as market returns increase, Liminal BioSciences' returns are expected to increase less than the market. However, during a bear market, the loss on holding Liminal BioSciences is expected to be smaller.
While it's important to monitor Liminal BioSciences' price patterns, it's also prudent to be conservative about what can be done with the information regarding historical equity price patterns. The approach to estimating future performance of any stock is to evaluate the business as a whole, including its past performance, all available fundamental and technical indicators.
We have identified twenty-one technical indicators for Liminal BioSciences, which can be used to evaluate the company's performance. Please consider Liminal BioSciences' coefficient of variation, Treynor ratio, as well as the relationship between the Treynor Ratio and semi variance to make a quick decision on whether Liminal BioSciences' current price movements will revert.
Further analysis
Liminal BioSciences (USA Stocks: LMNL) has shown a considerable level of volatility, which is reflected in its high kurtosis of 52.37 and skewness of 6.84. These figures suggest that the stock's returns have a propensity for extreme values, either positive or negative. This is further supported by the stock's high standard deviation of 5.32, indicating a higher level of risk associated with the stock. However, it's important to note that the stock's total risk alpha is 0.2308, suggesting that the stock's returns have a slight tendency to outperform the market on a risk-adjusted basis. Despite the stock's potential upside of 2.58, investors should be aware of the stock's maximum drawdown of 39.99, which indicates the largest potential loss from a peak to a trough. Volatility is a rate at which the price of Liminal BioSciences or any other equity instrument increases or decreases for a given set of returns. It is measured by calculating the standard deviation of the annualized returns over a given period of time and shows the range to which the price of Liminal BioSciences may increase or decrease. In other words, similar to Liminal's beta indicator, it measures the risk of Liminal BioSciences and helps estimate the fluctuations that may happen in a short period of time. So if prices of Liminal BioSciences fluctuate rapidly in a short time span, it is termed to have high volatility, and if it swings slowly in a more extended period, it is understood to have low volatility. Please read more on our technical analysis page.
How important is Liminal BioSciences's Liquidity
Liminal BioSciences financial leverage refers to using borrowed capital as a funding source to finance Liminal BioSciences ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Liminal BioSciences financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to Liminal BioSciences' owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Liminal BioSciences' financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between Liminal BioSciences's total debt and its cash.
Breaking it down a bit more
The firm reported the previous year's revenue of 401 K. Net Income was 622 K with loss before overhead, payroll, taxes, and interest of (14.9 M). Liminal BioSciences (NASDAQ: LMNL) has been a volatile stock, with a standard deviation of 5.32 and downside deviation of 1.95, suggesting significant price fluctuations. The company's Z score of -23.95 indicates a high probability of bankruptcy at 96.00%, which is a worrying sign for investors. With a market capitalization of $18.38M and shares outstanding at 3.1M, the stock's price to earnings ratio is 0.92X, and price to sales ratio is a hefty 32.76X. While the company's net income stands at $622K, indicating a profit margin of 7.03%, the return on equity is a loss of 0.97.Furthermore, Liminal BioSciences' current liabilities amount to $30.36M, compared to a working capital of $31.21M and total assets of $50.46M. The company's debt to equity ratio is low at 1.31%, suggesting a relatively healthy financial structure. However, the stock's beta of 29.84 suggests it is highly sensitive to market movements, while the downside variance of 3.81 further underscores the risk. In light of these factors, investors should carefully consider the potential for a dip in LMNL's stock price in August. Despite a target price of $7.5, the company's financial instability, as indicated by its Z score and high probability of bankruptcy, suggest that a cautious approach may be warranted. .
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