Biotechnology company Vaxart, Inc. (VXRT - Get Rating) develops oral recombinant protein vaccines based on its proprietary oral vaccine platform. The price of its shares has risen 129.5% over the past year on investors’ optimism over the prospects of the company’s COVID-19 vaccine, VXA-CoV2-1.

However, VXRT’s stock price has tumbled 24.5% over the past three months. In fact, the stock closed yesterday’s trading session at $6.51, 73.9% below its $24.90 52-week high.

Although the company’s room-temperature stable, tablet-based COVID-19 vaccine development has helped its shares soar to a $24.90 high in February, the vaccine candidate is still in its clinical trial phase. Also, VXRT’s norovirus vaccine has yet to advance to a Phase 2 challenge study and it could  be some time  before there are definitive results on its efficacy. Against this backdrop, VXRT’s high valuation doesn’t look reasonable. So, we think the stock could witness a retreat in the near term.

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Here is what we think could influence VXRT’s performance in the near term:

Lagging in the COVID-19 Vaccine Race

VXRT is developing an oral COVID-19 vaccine that can be administered via room-temperature stable pills rather than injections. While this could be a game changer for the company in the long run, VXRT’s vaccine candidate is still in  clinical and preclinical trials, whereas industry leaders such as  Moderna, Inc. (MRNA), Pfizer, Inc. (PFE), and AstraZeneca Plc (AZN) have already been rolling out their vaccines for months. Since many countries  are speeding up their vaccination efforts, it could be that by the time VXRT completes its trials and gets approval to  make its vaccine commercially available, most countries may have completed  vaccinating most of their populations. Naturally, this eventually could hurt the company’s revenue-generating prospects.

Bleak Financials and Profitability

VXRT’s revenue declined 82.6% year-over-year to $506,000 in the first quarter, ended March 31. Its total operating expenses rose 345.4% from its  year-ago value to $16.02 million. Also, the company reported a $15.51 million loss from operations and a $16.01 million net loss for this period. Its loss per share was  $0.14.

The company’s 0.01%trailing-12-month asset turnover ratio is 96.4% lower than the 0.4% industry average. And its trailing-12-month ROE, ROA and ROTC are negative 45.2%, 22.8% and 26.5%, respectively.

Sky-High Valuation

In terms of forward EV/Sales, VXRT is currently trading at 204.36x, which is significantly higher than the 6.44x industry average. Its 269.70 forward Price/Sales multiple  is 3,628.7% higher than the 7.23 industry average.

Unfavorable POWR Ratings

VXRT has an overall F rating, which translates to Strong Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight different categories. VXRT has a D grade for Growth and Quality. The stock’s weak growth prospects and low profitability are reflected in these grades.

It also  has a C grade for Value, which is consistent with the stock’s premium valuation.

In addition to the grades we’ve highlighted, one can check out additional VXRT ratings for Sentiment, Stability and Momentum here.

VXRT is ranked #469 of 495 stocks in the F-rated Biotech industry.

There are several top-rated stocks in the same industry. Click here to view them.

Bottom Line

Even though VXRT’s oral COVID-19 vaccine candidate has raised investors’ hopes for f value creation, unless the company completes  clinical trials and receives the FDA’s approval, its revenue potential from this vaccine candidate remains in question. Furthermore, VXRT’s lackluster financials and stretched valuation make it a highly speculative investment. So, we think it could be wise to avoid the stock now.

Click here to checkout our Healthcare Sector Report for 2021

VXRT shares were trading at $6.50 per share on Thursday morning, down $0.01 (-0.15%). Year-to-date, VXRT has gained 13.84%, versus a 9.74% rise in the benchmark S&P 500 index during the same period.

About the Author: Imon Ghosh

Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...

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