Simple Concepts Research Group

Here’s What Wall Street Is Missing About This Biotech Stock

by | Nov 3, 2021 | Stock Picks

Surface Oncology (SURF) Company Overview & Stock Price Forecast

This article provides a brief analysis and stock rating for Surface Oncology (SURF) including an updated stock price target. Additional data on the company’s earnings yield, price/earnings ratio, return on invested capital and YTD performance are discussed as well.

Surface Oncology Fundamentals

SURF Stock Rating

Stock Price Target: $14.61

In the section below, we discuss the earnings yield, P/E, return on invested capital and YTD performance for Surface Oncology in comparison to the Biotechnology industry and the S&P 500.

Surface Oncology is a Small Cap company with a Market Cap of $343.14M.

How are investors using Surface Oncology’s earnings yield to assess the company?

Surface Oncology (SURF stock)_ Earnings Yield in Comparison to the Biotech Industry, S&P 500 and 10 Year Treasury Rate

The earnings yield is used to show the percentage of a company’s earnings per share. Investors typically use earnings yield to determine which assets are underpriced or overpriced relative to other variables, like sector, industry or bond yields. Simply put, the earnings yield of a company can be used to assess how expensive a company is in relation to the earnings that are generated. When valuing companies, the SIS Research Group does not utilize the inverse P/E ratio to calculate the earnings yield. Instead, we use an adjusted earning yield calculation to capture variation amongst companies (i.e. debt and tax rates).

The current earnings yield for Surface Oncology is 34.01%%, in comparison to 3.43% for the S&P 500 and 1.56% for the 10-year treasury bond. The median earnings yield for the Biotechnology industry is 1.78%.

What does Surface Oncology Price-to-Earnings Ratio (P/E) tell investors about the company?

Surface Oncology (SURF)_ Price-to-Earnings, Price-to-Sales and Price-to-Book Value in Comparison to the Biotechnology Industry and the S&P 500

The price-to-earnings ratio (P/E) is a relatively popular metric used by investors and analysts for valuing a company’s stock. The P/E ratio can be used to show how a stock’s valuation compares to other companies and the total market. Investors use the P/E ratio to determine what the market is willing to pay today based on a company’s past or future earnings. A high P/E ratio could mean that a stock’s price is too high relative to earnings, which could be a signal that a stock is currently overvalued. In turn, a low P/E ratio could indicate that a company’s current stock price is low relative to earnings. 

Surface Oncology is currently trading at a P/E of 21.29. The P/E for the Biotechnology industry is 96.64 and the P/E for the S&P 500 is 29.17.

What is the current Price-to-Sales Ratio (P/S) for Surface Oncology?

The Price-to-Sales Ratio (P/S) looks at a company’s market cap and revenue to determine valuation. The P/S ratio is calculated by taking a company’s market cap and dividing by the total sales or revenue. The P/S ratio gives an idea of how much the market values every dollar of a company’s sales and can be effective in valuing unprofitable growth stocks or companies that are currently undergoing special situations or challenges. A lower the P/S ratio can be an indicator of good value.

Surface Oncology is currently trading at a P/S of 2.27. The P/S for the Biotechnology industry is 8.09 and the P/S for the S&P 500 is 3.17.

How does Surface Oncology Price-to-BookRatio (P/B) compare to the Biotechnology industry?

Price-to-book value (P/B) is the ratio of the market value of a company’s shares divided by its book value of equity (the value of it’s assets on the books). The book value is the difference between the book value of assets and liabilities. Typically, investors use the P/B ratio to assess if a stock is valued properly (a value of one means that the stock price is trading in line with the book value of the company). A company with a high P/B ratio could mean the stock price is overvalued as well as the converse.

Surface Oncology P/B ratio is 1.96. The P/B for the Biotechnology industry is 7.18 and the P/B for the S&P 500 is 4.93.

How attractive is Surface Oncology’s Return on Invested Capital (ROIC) to investors?

Surface Oncology (SURF stock)_ Return on Invested Capital in Comparison to the Biotechnology Industry and the S&P 500

Investors use the return on invested capital (ROIC) to assess how efficient a company is at turning capital into profits. The ROIC is the amount of money a company makes on it’s investments that is above the average cost of debt and equity.

Investors can use the ROIC to provide context for metrics like the (P/E) ratio. For instance, when used in isolation a low P/E ratio could suggest a company is oversold but the decline could be because a company is no longer generating value for shareholders. Conversely, companies that consistently generate high rates of ROIC can plausibly trade at a premium compared to other stocks, even if their P/E ratios are high.

Surface Oncology ROIC is currently 10.33% in comparison to 33.12% for the Biotechnology industry and 8.60% for the S&P 500.

What is Surface Oncology YTD Performance in comparison to its industry and the total market?

The year-to-date (YTD) performance is the amount of profit/loss realized by a stock since the first trading day of the current calendar year. 

The YTD performance for Surface Oncology is -18.61%. The Biotechnology industry has a YTD performance of -6.76% in comparison to the YTD S&P 500 performance of 23.54%.

Surface Oncology (SURF stock)_ YTD Performance in Comparison to the Biotechnology Industry and the S&P 500

Recent Financial Results

  • Cash and cash equivalents reported of $164.3M, compared to $175.1M in December 2020
  • Research and development expenses of $12.7M for Q2 2021, compared to $9.5M for the same period in 2020 (increase was primarily driven by progression in Phase 1 clinical trials; $0.9M in stock-based compensation expense are included in this total as well)
  • General and administrative expenses of $6.4M for Q2 2021, compared to $5M for the same period in 2020 (increase was primarily due to increases in personnel and facility related costs, this expense also includes $1.4M in stock-based compensation)
  • Net loss reported of $19M, or basic and diluted net loss per share attributable to common stockholders of $0.44
  • Company projects that current cash and the anticipated near-term milestone from GSK are sufficient to fund the company through 2023

Stock Price Target: $14.61

Company Overview

SURF Stock Rating

Surface Oncology is a clinical-stage immuno-oncology company that engages in the development of cancer therapies in the US. The company develops various antibodies for cancer therapies and an early stage program targeting regulatory T cells.

Surface has a strategic collaboration agreements with Novartis Institutes for Biomedical Research, for the development of cancer therapies, a license agreement with GlaxoSmithKline to develop, manufacture, and commercialize antibodies that targets SRF813, as well as a clinical trial collaboration with Roche Holding AG to evaluate SRF388.

Surface Oncology was incorporated in 2014 and is headquartered in Cambridge, Massachusetts. The current CEO is Robert Ross, M.D.

Be sure to add Surface Oncology (SURF stock) to your Watch List and if you haven’t done so already, check in on the performance of our Current Portfolio. Keep it simple and always do your due diligence.

This material is provided for informational purposes only and is not financial advice. The information contained herein should not solely be used for the formation of an investment decision, whether you are a long term or short term investor.