OxySure Therapeutics Inc. (OXYS)

[Kbro13]

$OXYS Good article, I would replace "May Be" with "Extremely"

http://www.biotechstocktrader.com/oxysure-therapeutics-oxys-may-be-undervalued-compared-to-others-in-biotech-space/


OxySure Therapeutics (OXYS) May Be Undervalued Compared to Others in Biotech Space
Written by Ryan Allway on Mar 21, 2016

OxySure Therapeutics Inc. (OTCQB: OXYS), developer of oxygen-from-powder technology and related medical solutions, has come a long way over the past year. Management anticipates reaching a $10 million annual run rate and achieving breakeven later this year. With 14 consecutive quarters of revenue growth, the company has a long track record of increasing shareholder value.

Despite these tremendous gains, the company’s stock has fallen sharply over the past year and its market capitalization stands at less than $3 million. Short interest in the stock has also remained high, which has put downward pressure on the stock over the past year. It’s worth noting, however, that any upward price momentum could cause a short squeeze and send shares significantly higher as short sellers are forced to cover their positions. A market expert recently noted that OXYS is priced more like an “option.”

In this article, we’ll take a look at the company’s revenue multiples, growth potential, and road to profitability, as well as its valuation relative to some of its peers.

Comparing Revenue Multiples

OxySure Therapeutics reported trailing 12-month (TTM) revenue of $3.4 million during the third quarter of 2015. According to SeeThruEquity, revenue could reach roughly $3.1 million for the full year and continue accelerating into this year. These revenues are being driven largely by organic growth initiatives, such as its supply agreement with Nasco that create upselling opportunities for its existing customer base.

A popular valuation measure used by investors is dividing a stock’s market capitalization by its trailing 12-month revenue to find what’s commonly known as its revenue multiple. Since many micro- and small-cap companies are focused on growth over profitability, this is the preferred metric for investors to compare smaller publicly traded companies. Price-earnings ratios are more commonly used for large companies focused on earnings more so than growth.

OxySure trades with a market capitalization of just under $3 million, which yields a revenue multiple of approximately 0.88x for the four quarters leading up to Q3 2015. When factoring in SeeThruEquity’s estimates for next quarter, this figure could fall to around 0.7x. These ratios are significantly lower than the 1.0x multiple that’s common across the wider stock market and the significantly higher multiples seen across comparably sized biotech companies.

To give the reader an understanding of where OxySure stands among their peers, here are the revenue multiples for a number of larger companies in the biotech space including; SciClone Pharmacueitcals, Inc. (NASDAQ: SCLN), BioTelemetry, Inc. (NASDAQ: BEAT), Glaukos Corp. (NYSE: GKOS), ConforMIS Inc. (NASDAQ: CFMS), and SurModics Inc. (NASDAQ: SRDX).

OXYS-03212016-1

Factoring in Growth Rates

Most investors look at growth in conjunction with revenue multiples in order to assess whether or not the multiples are justified or not. For example, a company that trades with a revenue multiple of 0.5x may seem undervalued until you look at its negative growth rate. Another company may be growing very quickly, but have a revenue multiple of 10x, which means that it may not be the best value for an investor relative to its peers.

The best opportunities are companies that are rapidly growing and trade at a discounted revenue multiple relative to its peers.

OxySure Therapeutics has a solid track record of 14 consecutive quarters of growth. In 2016, management anticipates doubling its annual revenue run rate from $5 million to $10 million, which is a significant top-line growth rate. These growth trends are driven by the company’s expanding sales force, growing product line-up, and distribution deals that are accelerating revenue both in the United States and around the world.

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Figure 2 – Quarterly Revenue Trends – Source: SeeThruEquity

Profitability on the Horizon

A final consideration for investors valuing companies based on revenue multiples is the sustainability of the business. After all, it’s easy to rapidly grow a company by spending increasing amounts of money on marketing and sales efforts. The difficult part is transitioning to profitability without sacrificing revenue growth by investing in effective marketing and growing revenues in an organic and reproducible way.

OxySure Therapeutics’ management team anticipates reaching a cash flow breakeven point this year, which will eventually be followed by a GAAP breakeven. With its existing distribution channels in place, the company anticipates being able to continue to accelerate its revenue growth while transitioning to a more stable footing financially. Profitability also reduces the need to raise capital and dilute existing shareholders in the stock.

Looking Ahead

Many investors look at revenue multiples when comparing high-growth investment opportunities. In addition to these multiples, investors look at a company’s revenue growth rates and timeline toward profitability to put the number into context.

OxySure Therapeutics trades at a discount to many of its industry peers when looking at revenue multiples. Management’s track record of growth and expectation for profitability this year make the opportunity even more compelling for investors.

For more information, visit the company’s website at www.oxysure.com.

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