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This Is Why Bioamber Inc (NYSE:BIOA) Is A Great Undervalued Stock

This Is Why Bioamber Inc (NYSE:BIOA) Is A Great Undervalued Stock
Written by
Jim Bloom
Published on
December 9, 2017
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Buying an undervalued stock with a great outlook is always the dream of any investor looking to generate significant returns in the stock market. Bioamber Inc (NYSE:BIOA) appears to fit the bill if its current trading levels and outlook is anything to go by.Needless to say, the Canadian chemical company has been on the receiving end for the better part of the year seen by its trading levels. The stock is currently trading at levels never seen before having felt the full wrath of short sellers.For the full year, the stock is down by more than 90% as it languishes near its 52-week low of $0.32. However, it appears to be at a critical point after a strong bearish run. For the last three months, the stock has been in consolidation trading between the $0.32 and $0.63 trading range. BIOA Daily ChartIt appears investors are starting to take note of the company’s long-term prospects supported by strong fundamentals. The stock has started to receive a lot of attention from institutional investors given the buying opportunity that seems to be building up, in the background.Before we look at what could drive the stock higher, let us first understand what BioAmber does.BioAmber Business OverviewFormerly Green Technology, BioAmber is an industrial technology company focused on the production of sustainable chemicals. The company has a market cap of $20.5 million.The company combines industrial biotechnology and chemical catalysis to convert renewable feed stocks into sustainable chemicals that are replacements for petroleum-derived chemicals.Bio Amber’s bio-succinic acid is commonly used in various applications including plasticizers, personal care products, resins, and coatings.BioAmber Valuation BioAmber is undervalued when compared to industry standards and taking into consideration its price-to-book ratio. A PB ratio of 0.2X is way below the industry average of 3.3X underscoring the fact that the stock has a lot of room to run on the upside.Outlook is also important when planning to invest in the stock market. BioAmber fits the bill as a fast growing company based on future expectations. Profit over the next 12 months is set to grow by 40.5% pointing to a bright future. Robust growth should lead to higher cash flows which should lead to a higher share price valuationQ3 Financials While BioAmber has, the potential to register robust growth over the next one year, a lot still has to change given the disappointing third quarter financial results. Net revenues decreasing by 10% in the quarter to $3.3 million is a point of concern that continues to dent investor confidence in the stock.Cost of goods increasing by $1 million to $6 million is another concern that needs to be addressed if the company is to bounce back to profitability. The company recorded a net loss of (-$7) million in the recent quarter a slight increase from a net loss of (-$6.2) million generated a year ago.In defense of the disappointing financial results, Chief Executive Officer, Richard Eno, says they have identified new opportunities that should accelerate growth going forward.“Our technology is proven, we have identified numerous opportunities to drive down our variable costs, and our customer base and application pattern continues to expand," I look forward to leading the company as we grow our sales from Sarnia creating a foundation for long-term profitable growth,” said Mr. Eno.Institutional Holding Ever since BioAmber hit record lows of $0.32, it has experienced renewed interest, especially from institutional investors. The result has been a 23.5% run-up in share price as the stock continues its bounce back.Institutional investors currently hold about $7 million worth of the stock representing a 36.5% stake. Nn Investment Partners Holdings is the largest investor in the chemical company with a holding worth $3.43 million representing a $17.49%. The second largest investor is Sabby Management LLC with a holding of 3.2 million shares valued at $1.33 million. Robecosam Ag comes in third with a holding worth $618,000.Regulatory filings indicate that 13 institutional investors increased their positions in the company as of the end of the third quarter. BioAmber grabbed 4 new institutional investors in the quarter. Fillings also indicate that director Wall Kenneth W acquired 40,000 shares of BioAmber at $0.43 for a total of $17,000. Executive vice President Hartman Michael also bought 10,000 shares at $0.48 a share for a total sum of $4,800.Stock Rating BioAmber is currently rated as a ‘strong buy’ one analysts firm with another firm rating it as a ‘hold’. Analysts at HC Wainwright have initiated coverage of the stock with a share price target of $12. Analysts at Cowen, on the other hand, have a ‘buy’ rating on the stock with a share price target of $1.ValueEngine is the only brokerage firm to lower its rating on the stock after downgrading it from a ‘sell’ to a ‘strong sell’. During the second quarter, the firm raised its stake in the company by 9.9% and now owns 303,360 shares.Bottom LineTaking into consideration the positive analyst’s ratings, it appears institutional investors remained confident about BioAmber long terms prospects from the current trading levels. However, the company will have to post stellar fourth quarter financial results if it is to attract more investors and bounce back from current lows.We will be updating our subscribers as soon as we know more. For the latest updates on BIOA, sign up below!Disclosure: We have no position inn BIOA and have not been compensated for this article.

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