Pharamar: the best value of the Spanish stock exchange by ROE

Pharamar: the best value of the Spanish stock exchange by ROESkip to contentfinanzas.com updated 05: 54 CETAactualizalizar updating... EUR / USD1,11510.04 / 0.0004IBEX 358.609.80-1.10% -96,20INDITEX27.03-1.10% -0.30IBERDROLA10.12-0.74% -0.08SANTANDER3.15-1.72% -0.06CELLNEX39,94-1,7

Pharamar has the highest ROE return on the Spanish stock exchange, an important ratio to restore investor confidence

Pharamar has just signed his blackest year on the stock market since 2018. Plunged into a crisis of confidence, bass drip depressed a company that in 2020 revalued 65 percent. Even so, the pharmaceutical company is the best value on the market in financial profitability (ROE).

While investors usually focus on stock returns and future business projections, analysts often use other metrics to assess the financial profitability of companies. Stock market profitability and financial profitability are two distinct concepts.

The ratios most used to measure financial profitability are ROE or profitability over own resources. The utility of this rate is that it goes beyond the pure and hard profit figure, relating the profits to the resources that the company has had to mobilize to obtain them.

The ROE is defined as the ratio of net profit to own funds. The higher it is, it means that the company is able to generate profits with fewer resources than other companies.

It is also a way of knowing to what extent companies are able to create value for their shareholders.

Pharamar, leader in profitability

According to consensus data from financialanalysts, Pharamar discounts a ROE return of 32 percent for 2022.

This percentage exceeds Cie Automotive (31.09 per cent) and Robi laboratories (29.64 per cent). In addition, it marks distances with a heavy weight such as Inditex (24.7 percent).

It also leaves far behind comparable companies in the pharmaceutical sector. For example, Grifols, which has an 11.91 percent ROE, or Almirall (4.57 percent).

Comparative rates allow us to see why financial analysts carefully analyze this variable to build their portfolios.

For every euro invested in its own business, Pharamar generates a return of 32 percent, while Grifols only reaches 11 percent and Almirall does not reach even 5 percent.

For Galician biopharmaceuticals it is important, since in recent years it has discounted a negative ROE.

In the shadow of Aplidin

The positive leap took place shortly before the pandemic, when the group began to accelerate its profits per share. And in fact, it ended 2020 with profits of 131 million, thanks to Zepzelca royalties in the United States.

The increase in profits, which is ultimately the driving factor for ROE profitability, value Pharamar's results. That they are on the right track is something that the market does not question.

The problem that hurt the stock market is the high expectations generated by Aplidin as a treatment for the coronavirus, and the delay in the marketing horizon until May 2022, according to financial.com.

Although Pharamar is a value dominated by news, showing positive ROE profitability is an important factor in attracting investors, especially if they are foreign.

At the very least, the ROE has to be positive and higher than the opportunity cost or profitability that can be obtained with other alternative investments.

60% upward potential

Pharamar's profitability expectations live up to the 60 per cent upward potential calculated by the consensus of analysts.

To improve its stock market appearance and get into a lateral range, Galician biopharmaceuticals needs a bounce of 15 percent, until it conquers the resistance of 63 euros.

So far, it has managed to mark a weekly closure of more than 56.6 euros. In Diego Morín 's view, this requirement is important to deploy the attack on 60 euros.

But the future of the bounce will depend on the news that goes beyond Aplidin, which has a new opportunity after the explosion of contagion by the omicron variant.

The profile of patients undergoing the final trial is very specific. These are patients with moderate impairment who have needed hospital admission, but do not need to enter intensive care units.

Don't wait. Anticipate. Make up your mind.

José Jiménez has been a financial.com journalist since 2008 and has more than 15 years of experience in economics, stock markets and financial markets. He also writes for investment