LON:RENX | Renalytix - Am I Missing Something?

7th Jul '21 by Johnsy

5 comments 702 reads

Briefly, this company makes increasing losses every year. Its operating margin is -4981%. Its revenue is expected to grow by 470% next year, but its losses are expected to almost double at the same time!

2022E revenue is 8825% higher than TTM revenue.

I would expect its bankruptcy risk to be at least in the caution zone, but it is at the far end of the green zone, with a z-score of 247. Its health rating however is just 3.

Despite the number of shares increasing by 10%, book value per share has increased by 148%.

I can't understand why analyst consensus is somewhere between "buy" and "strong buy".

Net gearing is -68%. I wonder if investors are thinking that means everything is OK. Does the earnings manipulation risk rating need to be revised from "low"?

At present it is a "momentum trap". Should that be revised to "sucker stock"?

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KTF67

8th Jul '21

net cash YE 21 is likely to be around 70-80m. JP Morgan forecast cash burn approx 40m (21), 40m (22), 17m (23) then revenues rise towards 200m (24) to give Ebitda 40m. By 2030 revenues should be 500m-1bn with Gross Margin 80%, Ebitda margin 42%. My DCF using 800m revs (2030) then 3% growth says the share price is worth £24 but 800m maybe conservative. CareDX mkt cap is $4.7bn on 192m revs (2020, I don't have any forward ests).

Welshborderer

11th Jul '21

This is all about the future and from a stable based company heavily tied into the Mount Sinai Hospital group. This contract has already been secured and larger ones are anticipated:

https://www.sharecast.com/news...

The background is contained here:

https://s3-eu-west-1.amazonaws...

I am not qualified to interpret what analysts factor in or leave out of their evaluations.

tim boddington

15th Jul '21

Absolutely, this is about the future. I held but sold as the price yo yoed up and down.

The interest from the US FDA and the US National Institute of Health NIH is what really will push this stock forward. I have worked in renal dialysis for many years and it is an expensive therapy, fully reimbursed in the US since the 1970s. The idea that an algorithm can be used to predict a health condition is what excites health providers and funders.

So this is for the future or, more likely, acquisition. My money is on acquisition, perhaps by one of my favourite hidden champions, German company Fresenius.

donald pond

I hold this company and think it is incredibly cheap. Here is why.

Healthcare in US is paid for entirely by insurers. About 30% of the US population is at risk of kidney disease. Dialysis costs between $30k-$90k per year and kidney transplants cost around $450k. So a patient presenting with kidney disease that needs these treatments is a disaster.

RENX offer a test for $950 which gives an accurate prediction of the likely path of the patient. If that test can be used to give patients either a preventative programme or drugs which delay the need for dialysis by even a few months, it has paid for itself many times over. So insurers will want to be rolling the test out very quickly.

The margins are I believe around 70-80%. So do the maths. But in an interview the boss said that it was quite possible that revenues went from zero to hundreds of millions in one leap.

then when you think that this is being rolled out to millions of customers, many in the "diabetes belt" of the south, you can quickly do some maths...1m tests would be around $600-700m PROFIT p.a. But they could be doing many multiples of that very quickly. Add in a US style PE, and the share price can be whatever you want it to be. But obviously, they need to get authorisation and roll out, but Medicare are keen and the US government agencies have signed up, so the signals are good.

BTW Johnsy I see from your profile that you are relatively new to stockopedia. Stock ranks have many benefits, but the quality and value ranks are inherently backward looking. When they are looking at a company that is essentially pre-revenue, whether a mining explorer, drugs developer or in the case of Renalytix (LON:RENX), maker of a new diagnostics tool, they will always come out very low. The stock ranks are a good tool, but you need to look under the bonnet at what a company does to understand why the stock ranks are where they are. Maxcyte Inc (LON:MXCT) is another one that looks overvalued but has explosive growth potential ahead.

Renalytix - Am I missing something?

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Johnsy

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