Geron

Geron Corp receives a 3-star quantitative star rating, indicating our belief that this share class is a balanced choice, but prudent investors should consider looking elsewhere. The stock currently trades at a 8% discount to our quantitative fair value estimate of $1.30 per share; however, caution is warranted due to this estimate's high uncertainty rating.

The firm's balance sheet strengthens our quantitative valuation. Leverage can enable a company to invest in growth, potentially boosting shareholder value more than equity financing alone. For example, the firm's EBITDA/interest coverage ratio of -1.7 falls in the bottom 20% globally. Although the firm's ability to cover interest payments with EBITDA is limited, shares could sharply rebound if economic circumstances change or recent investments reduce fears of default. We believe this is a sign that shares could be cheap.

On a different note, the company's lack of profitability is potentially concerning. Companies with low profitability are often less resilient in recessions and are likely to generate weaker future cash flows for shareholders. The firm's earnings yield of -4.3%, a core component of profitability, sits in the bottom 20% globally. The earnings generated by the company relative to its share price is concerning, which, despite our favorable price/fair value ratio, is a negative attribute.

In addition to the aforementioned drivers, our model considers momentum as part of its comprehensive analysis. This share class has outperformed the broader universe over the past year. While we believe the stock is undervalued, this outperformance had a negative impact on our valuation estimate.

The company's quantitative economic moat rating of none suggests any excess returns could erode quickly as competition arrives. Additionally, the firm's moderate financial health score suggests it is acceptably positioned against adverse economic circumstances.