Wednesday, August 1, 2007

Advanced Magnetics Inc.

Advanced Magnetics Inc. is a NASDAQ listed security that has been trading in a range between $30.26 and $72.95 over the past year. With 16,746,440 shares outstanding, a recent price of $57.61 gives a total market capitalization of $924,403,501. While there are certainly larger companies, Advanced Magnetics Inc. has definitely earned its place in the pack. Last year, Advanced Magnetics Inc. created $-2.67 in earnings for every share outstanding.

Advanced Magnetics Inc. is currently priced by the market at 0.00 times last year’s earnings. Many trading multiples around the world are quite attractive these days, but don’t be fooled. A Price to Earnings ratio of 0 simply means that the security didn’t make any money last year.

With a share price over $50 a share and earnings per share below $1 a share, Advanced Magnetics Inc. is unlikely to be an interesting value proposition. Consistent earnings are the key to high valuations and this security is not on its way.