A Multiyear Journey From Small Biotech to Front-Page News

In the race to get vaccinated, the U.S. is in the lead...

In the April 14 Altimetry Daily Authority, we mentioned how the U.S. is currently near the head of the global pack in getting its population vaccinated against the coronavirus. Now, as of this week, every American adult is eligible to receive the vaccine.

Thanks to heavy government spending under both the Trump and Biden administrations, the U.S. has been able to bolster vaccine production from multiple manufacturers. Currently, around half of American adults have received at least one shot. 

While the U.S. has pulled away from the rest of the world, it's still far from the 75% vaccination rate that many epidemiologists believe is required for herd immunity. And vaccination efforts are now in a race against time.

More infectious and deadlier virus variants from the U.K. and other regions of the world have already popped up across the U.S.

And while the U.S. is chugging along, it will take years for everyone across the globe who wants a vaccine to get one. Experts also don't know how often the public will need booster shots or other follow-up vaccinations as new variants emerge. 

With all that sustained demand, the world continues to look to the biotech companies leading the vaccine charge. The massive effort to get vaccines out is well underway... But the work is far from over.

At the heart of this surge is a relative newcomer in the biotech world... 

As recently as two years ago, Moderna (MRNA) was researching revolutionary but still unproven technologies.

The company has focused on using treatments based on molecules similar to DNA for everything from cancer treatments to vaccines. In 2020, after following various research paths that hadn't yet received approval from the U.S. Food and Drug Administration ("FDA"), Moderna finally had a perfect opportunity to leverage the technology to create a coronavirus vaccine.

Today, Moderna is one of the top 15 U.S. biotech companies by market cap... and is at the forefront of the battle against the pandemic. Along with Pfizer (PFE), the company created one of the first vaccines approved by U.S. regulators for the coronavirus.

While Moderna has agreed to set vaccine costs with governments instead of pricing its vaccine on the open market, it will likely earn big profits from its vaccine developments thanks to the likely need for booster shots.

So, to better understand the company's true earnings power, we can turn to The Altimeter... 

Using the power of Uniform Accounting – which eliminates the distortions in as-reported financial metrics – The Altimeter shows users easily digestible grades to rank stocks based on their real financials.

After making the Uniform adjustments, we can see that Moderna's return on assets ("ROA") has gone from negative to positive during the pandemic. But you wouldn't see this by looking at the GAAP metrics... 

On an as-reported basis, Moderna's ROA sat at negative 19% before the pandemic and only rose to negative 11% last year.

On the other hand, based on Uniform Accounting, the company's ROA inflected from negative 6% in 2019 to a whopping 16% in 2020. That's a huge turnaround.

Due to its strong profitability and significant tailwinds, Moderna gets "A" ratings for overall Performance, Earning Power, and Earning Power Trend in The Altimeter. Take a look...

Using The Altimeter and Uniform Accounting, we can see just how powerful the vaccine efforts have been for Moderna's bottom line.

However, just because a company has recently seen a turnaround in performance doesn't mean its stock is a buy...

If the market is pricing Moderna to perform even better in the future, management might not be able to live up to lofty expectations after the pandemic recedes. If the market is overvaluing Moderna's stock, investors who buy shares today could be set up for disappointment. 

Thankfully, The Altimeter also shows us a company's real valuations. If you're an Altimeter subscriber, you can click here to see Moderna's valuations... and whether the stock is already priced for perfection.

If you aren't a subscriber yet, click here to find out how to gain instant access to the Uniform Accounting data you're missing out on for Moderna... as well as for Pfizer, Johnson & Johnson (JNJ), and the other big players in the sprint for the vaccine. That way, you can make smart investing decisions based on the real numbers.

Regards,

Rob Spivey
April 22, 2021