Corcept Therapeutics Inc Stock Analysis
Business Description: Corcept Therapeutics Inc is engaged in the discovery, development and commercialization of drugs for the treatment of severe metabolic, psychiatric and oncologic disorders by modulating the effects of cortisol.
Key Achievements by the Corcept Therapeutics Ins
As of December 31, 2016, the Company discovered three structurally distinct series of selective cortisol modulators. All of which shared mifepristone's affinity for GR but, unlike mifepristone, do not bind to the progesterone receptor, and so do not terminate pregnancy or cause other side effects associated with progesterone receptor antagonism.
The Company is conducting two clinical trials of its selective cortisol modulator, CORT125134. One trial is investigating CORT125134 as a treatment for patients with Cushing syndrome. The second trial is investigating the combination of CORT125134 and nab-paclitaxel (Celgene Corporation's Abraxane) to treat patients with solid-tumor cancers.
The Company has even received approval from the United States Food and Drug Administration (FDA) for Korlym (mifepristone) 300 milligrams (mg) Tablets as a once-daily oral medication for the treatment of hyperglycemia secondary to hypercortisolism in adult patients with endogenous Cushing syndrome who have type II diabetes mellitus or glucose intolerance and have failed surgery or are not candidates for surgery.
It is enrolling patients in a Phase II trial of its selective cortisol modulator, CORT125134, to treat patients with Cushing syndrome. It is developing a CLIA-validated assay to measure expression of the gene FKBP5, which is stimulated by cortisol activity at GR.
It is conducting a Phase I/II trial of Abraxane (nab-paclitaxel) in combination with CORT125134 to treat any solid-tumor cancer suitable for treatment with Abraxane.
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While analyzing the stock’s health, how can we forget about the SWOT analysis. A lot depends on various Internal and External factors surrounding the company. Hence, let’s have a look at those inevitable reasons.
Strengths of Corcept Therapeutics Incorporated – Internal Strategic Factors:
- Strong dealer community: It has built a culture among distributor & dealers where the dealers not only promote company’s products but also invest in training the sales team to explain to the customer how he/she can extract the maximum benefits out of the products.
- High level of customer satisfaction: The company with its dedicated customer relationship management department has been able to achieve a high level of customer satisfaction among present customers and good brand equity among the potential customers.
- Strong Brand Portfolio: Over the years Corcept Therapeutics Incorporated has invested in building a strong brand portfolio. The SWOT analysis of Corcept Therapeutics Incorporated just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- Reliable suppliers: It has a strong base of reliable supplier of raw material, thus enabling the company to overcome any supply chain bottlenecks.
- Successful track record of integrating complimentary firms through mergers & acquisition: It has successfully integrated number of technology companies in the past few years to streamline its operations and has built a reliable supply chain.
- Highly skilled workforce through successful training and learning programs. Corcept Therapeutics Incorporated is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.
- Automation of activities brought consistency of quality to Corcept Therapeutics Incorporated products and has enabled the company to scale up and scale down based on the demand conditions in the market.
Weakness of Corcept Therapeutics Incorporated – Internal Strategic Factors:
- Current Organization structure is compatible only with the present business model. Thus, limiting expansion in adjacent product segments.
- There are gaps in the product range sold by the company. This lack of choice can provide headway for the new competitors to get a foothold in the market.
- Limited success outside core business: Even though Corcept Therapeutics Incorporated is one of the leading organizations in its industry, it has faced challenges in moving to other product segments with its present culture.
- The company has not been able to tackle the challenges present by the new entrants in the segment and has lost small market share in the niche categories. Corcept Therapeutics Incorporated needs to build internal feedback mechanism directly from sales team on ground to counter these challenges.
- The marketing of the products left a lot to be desired. Even though the product is a success in terms of sale but its positioning and unique selling proposition is not clearly defined which can lead to the attacks in this segment from the competitors.
Opportunities for Corcept Therapeutics Incorporated – External Strategic Factors:
- Stable free cash flow provides opportunities to invest in adjacent product segments. With more cash in bank the company can invest in new technologies as well as in new products segments. This should open a window of opportunity for Corcept Therapeutics Incorporated in other product categories.
- Government green drive also opens an opportunity for procurement of Corcept Therapeutics Incorporated products by the state as well as federal government contractors.
- Lower inflation rate: The low inflation rate brings more stability in the market, enabling credit at lower interest rate to the customers of Corcept Therapeutics Incorporated.
- New environmental policies: The new opportunities will create a level playing field for all the players in the industry. It represents a great opportunity for Corcept Therapeutics Incorporated to drive home its advantage in new technology and gain market share in the new product category.
- New customers from online channel: Over the past few years the company has invested vast sum of money into the online platform. This investment has opened new sales channel for Corcept Therapeutics Incorporated. In the next few years, the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
- The new technology provides an opportunity to Corcept Therapeutics Incorporated to practice differentiated pricing strategy in the new market. It will enable the firm to maintain its loyal customers with great service and lure new customers through other value oriented propositions.
- Opportunities for new markets because of government agreement: the adoption of new technology standard and government free trade agreement has provided Corcept Therapeutics Incorporated an opportunity to enter a new emerging market.
Threats Corcept Therapeutics Incorporated Facing - External Strategic Factors:
- New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories.
- Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
- Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
- New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
- As the company is operating in numerous countries, it is certain to be exposed to currency fluctuations especially given the volatile political climate in number of markets across the world.
- Liability laws in different countries are different and Corcept Therapeutics Incorporated may be exposed to various liability claims given change in policies in those markets.
- The demand for the highly profitable products is seasonal in nature and any unlikely event during the peak season may impact the profitability of the company in short to medium term.
- Imitation of the counterfeit and low quality product is also a threat to Corcept Therapeutics Incorporated’s product especially in the emerging markets and low income markets.
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Corcept Therapeutics Inc – Deciding Ratios
The company is doing well in terms of popularity. However, it is equally important to be on top of various other parameters that can be the game changer of every stock. Hence, here is the analysis based on those past and current performances.
Looking at the competition, Corcept Therapeutics Inc (CORT) has lower Market Cap from its peers. Both the price to sales ratio of 9.4 and the price to book ratio of 7.6 is higher than industry average. The only valuation ratio below market average is the price to earnings ratio. Moreover, this company has a very high 5-Yr Revenues CAGR of 117 % and inflating high interest coverage ratio of 1078. All these seem fair enough to boast the popularity of the stock. However, the problem can be from the profitability end. The company has a Med Oper Margin of -6.8%. Hence, as per this data, the company isn’t doing good if profitability alone is considered.
However, this alone cannot be the benchmark for deciding the worth of the company’s stock. Hence, let’s check out other parameters.
Corcept Therapeutics Inc (CORT) has very nice margins which has improved over the years. So, this company has a Gross Margin higher than 95% since 2012, a growing operating margin, growing EBT Margin and Net Margin, all above 30% since 2017. Moreover, this company has growing positive return on assets, return on equity and return on invested capital (again, all above 30%) and decreasing Cost of Goods Sold, Sales General and Administrative Expenses and Research and Development expenses.
This suggests that Corcept Therapeutics is increasing profitability by decreasing expenses. Isn’t what something is required to improve the current profitability for good? However, in doing so, the company has lowered the Research and Development Expenses which is very important for new products development in pharmaceutical industries (development of new drugs).
In terms of growth, Corcept Therapeutics Inc (CORT) has a remarkable yet unstable revenues growth over the years. In the data tab one can observe that the growth rates are very high, but the magnitude varies a lot. Hence, stability is a concern at the moment.
Focusing on Corcept Therapeutics Inc (CORT) Cash Flow Ratios, one can observe that the enterprise started to generate growing operating Cash-Flows and Free Cash-Flows in 2016, a decreasing tendency in Capital Expenditures as a percentage of sales. This can significate two things: Firstly, this enterprise is generating growing revenues but do not want to increase their expenses much to keep sacrificing profitability. The company do not find a profitable use for growing incoming funds.
Secondly, this enterprise has a growing Free Cash Flow/Sales %. Which means, it is generating more wealth for the shareholders through sales. This very much indicates that the company is increasing efficiency and/or decreasing capital expenditures.
However, the decreasing Free Cash Flow/Net Income % is a bit worrying. This indicates of aggressive accounting standards and even of financial statements manipulation which can be detected taking a closer look to the company statements, notes and management discussion and analysis.
Corcept Therapeutics Inc (CORT) financial health and liquidity ratios have some good news for investors. The company has covered their short term financial obligations in past. This is evident with the astonishing Current and Quick ratio, both above 3 in 2017 and above 5 for the Latest Quarter.
Hence, this company actually have current assets 5 times greater than current liabilities. Moreover, this enterprise has a decreasing Financial Leverage Ratio signaling of decreasing amount of debt over time. Hence, according to the data, the stock is promising in terms of financial health.
Stock valuation is very important and should be considered before making any decision. As per the Corcept Therapeutics Inc (CORT) Valuation Ratios, the company appears to be undervalued. It’s because of the P/E ratio lower than the industry’s average and the other valuation ratios similar to industry average. However, the major indicative for me is the current valuation ratios which are very low compared to the CORT 5 Years Industry Average.
Another thing to notice is their Forward P/E ratio which has a similar amount to the current one. This is indicative of the price stability.
One can observe that the valuation ratios showing downhill slope with time (decreasing tendency). Considering it with other ratio classes, the enterprise is getting cheaper despites their profitability improvement. Hence, I believe that this is a good target for value investors.
Being a company with its roots dating back over a decade, it won’t be incorrect to quote it among the trustworthy companies. However, a decision to buy, hold and sell is a completely different outlook. With the given data, I deem that the company’s stocks are undervalued and can reap huge benefits in coming future. So, if you are blessed with patience, why not try this stock out.