Outlook Therapeutics Inc

Outlook Therapeutics Inc (NASDAQ: OTLK) is a New Jersey, United States-based late clinical-stage biopharmaceutical Company, which is focused on identifying, developing, manufacturing and commercializing biosimilar therapeutics.

Rationale for Valuation – Expensive at USD 2.53

• The Company has not reported the revenue, which raises uncertainty regarding its earning potential in the longer run.
• The Company’s profitability margins and Return on equity remained in the negative zone in the last period.
• On the leverage front, the debt-equity ratio stood at 1.64x in September 2020, which was higher than the industry median, reflecting that the Company is highly leveraged compared to the industry.
• From the technical standpoint, 14-day RSI stood at ~62.30, which means the stock price could decline in the short term.

Key Risks

• The Company operates in a highly regulated landscape, and failure to comply could lead to a significant financial or reputational loss.
• Also, the overdependence on technology can lead to loss of data and significant service interruptions.

Recent Developments

On 11 February 2021, the Company reported the final visit for the ongoing open-label safety study to treat retinal diseases (NORSE THREE), which evaluates ONS-5010/LYTENAVA™ (bevacizumab-vikg). The data from this study is estimated to be reported in Q2 FY21.

On 4 February 2021, the Company announced that it had a total USD 41.6 million of a public offering, strengthening the financial position and further providing the strategic optionality to maximize stockholder value.

Financial Highlights (for the year ended 30 September 2020 (FY20), as on 23 December 2020)

• For FY20, the Company reported a net loss attributable to common stockholders of USD 48.9 million, which increased from a net loss attributable to common stockholders of USD 36.0 million in the previous fiscal year.
• On 30 September 2020, the cash and cash equivalents were USD 12.5 million, which were lower than the previous period (30 June 2020: USD 24.0 million).
• It completed patient enrolment for the NORSE TWO pivotal registration study and the NORSE THREE open-label safety study during the period.

One Year Share Price Chart

 (Source: Refinitiv, chart created by Kalkine Group)

Conclusion

Year 2020 has been a pivotal year for the Company. The Company is in the development stage and do not generate any revenue for the period. The profitability margins have remained stagnant or declined. However, it relied on the cash balances and fundraised from the stock market for all the operational tasks. Overall, it remains difficult to provide forward-looking guidance, due to the ongoing uncertainty. The stock made a 52-week low and high of USD 0.499 and USD 4.26, respectively.

Based on the factors as highlighted above, we believe the stock of Outlook Therapeutics Inc is “Expensive” at the closing price of USD 2.53 (as on 12 February 2021), with support from few catalysts needs to be evaluated at a later stage such as decent prospects of US market and improved investors sentiments.

Bsquare Corp

Bsquare Corp (NASDAQ: BSQR) is a Seattle, Washington-based global Company, which provides software solutions and related engineering services to businesses.

Rationale for Valuation – Expensive at USD 7.83

• The Company is trading near a 52-week high, and Price/Earnings, EV/EBITDA and Price/Cash Flow metrics are in the negative zone as compared to the industry multiples.
• The operating landscape remains highly volatile with the continuing uncertainty due to Covid-19 pandemic.
• In September 2020, the net margin and ROE were in the negative zone.
• From the technical standpoint, 14-day RSI stood at ~75.04 (overbought zone), which means the stock price could decline in the short term.

Key Risks

• The operational and financial pressures have slowed down the transformation programme.
• The Covid-19 pandemic has put clients, customers and the service delivery under huge pressure. This pandemic has also thrown up a myriad of challenges and opportunities.

Q3 Trading Update (as on 12 November 2020)

• The revenue for Q3 FY20 increased by 17% quarter-on-quarter, driven by increased service revenue in the Edge-to-Cloud segment and higher sales in the Partner Solutions segment.
• Adjusted EBITDA stood at around USD 0.3 million, which shows an improvement of USD 1.1 million over the negative USD 0.8 million in Q2 FY20.
• The Company stated stable cash, cash equivalents, restricted cash, and short-term investments at USD 12.6 million as of 30 September 2020.

One Year Share Price Chart

 (Source: Refinitiv, chart created by Kalkine Group)

Conclusion

The Company delivered a good performance in Q3, with revenue and margins increased sequentially, EBITDA results improved, and cash utilization was minimal. However, the business is more exposed to the economic uncertainties arising from the Covid-19 pandemic. In the future, the Company may face emerging headwinds and cost pressures. The Group is presently trading near the 52-week high, raising doubts at the upside potential at the current price level. The stock made a 52-week low and high of USD 0.83 and USD 11.83, respectively.

Based on the factors as highlighted above, we believe the stock of Bsquare Corp is “Expensive” at the closing price of USD 7.83 (as on 12 February 2021), with support from few catalysts needs to be evaluated at a later stage such as decent prospects of US market and improved investors sentiments.

R C M Technologies Inc

R C M Technologies Inc (NASDAQ: RCMT) is a New Jersey, United States-based engineering services Company. It is a premier provider of business and technology solutions.

Rationale for Valuation – Expensive at USD 5.94

• The Company’s profitability margins and Return on equity remained in the negative zone from the last three periods.
• The Company’s EV/EBITDA, Price/Earnings and Price/Cash Flow multiples are in the negative zone.
• From the technical standpoint, 14-day RSI stood at ~92.03 (overbought zone), which means the stock price could decline in the short term.

Key Risks

• In the near future, the Company will be facing uncertainties due to the increased aggressiveness of the competitor activities.
• The significant risk for the Company is to maintain worldwide legal and regulatory compliance.

Recent News

On 10 February 2021, the Company had provided an update on the obtained projects to assist its clients in producing higher grades of ethanol for use in beverage and hygienic applications.

Q3 Trading Update (as on 9 November 2020)

• For the thirteen-week period ended 26 September 2020, the Company’s revenue decreased by 21.6% YoY, with a decrease in gross profit of 16.9% YoY.
• For the thirty-nine week period ended 26 September 2020, the reported revenue decreased by 23.4% as compared with the corresponding period of the last year.
• The Company experienced a GAAP net loss of USD 0.2 million in Q3 FY20 as compared to GAAP net income of USD 0.3 million in Q3 FY19, while GAAP net loss of USD 7.2 million in the thirty-nine week period ended 26 September 2020.

Six Months Share Price Chart

 (Source: Refinitiv, chart created by Kalkine Group)

Conclusion

The Company saw another decent quarter, with a reduction in net debt of 62% and a strong cash flow. Looking forward, it expects to ramp up the investment and will be expanding the worldwide sales and marketing activities. RCMT’s operations were not materially impacted by the covid-19 pandemic, while the market remained highly uncertain. Moreover, the Company works in a challenging environment that requires continuous investment, sometimes at the profitability cost, to stay ahead of competitors. The Group is presently trading near the 52-week mid, raising doubts at the upside potential at the current price level. Overall, the Company is still in the development stage. The stock made a 52-week low and high of USD 1.02 and USD 12.49, respectively.

Based on the factors as highlighted above, we believe the stock of R C M Technologies Inc is “Expensive” at the closing price of USD 5.94 (as on 12 January 2021), with support from few catalysts needs to be evaluated at a later stage.

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