A Look At Botanix Pharmaceuticals (ASX:BOT) Valuation After Its A$45m Follow On Equity Offerings

Botanix Pharmaceuticals (ASX:BOT) has drawn fresh attention after filing multiple follow on equity offerings totaling A$45 million. The company is issuing new ordinary shares at A$0.06 with attached options that could reshape its capital structure.

See our latest analysis for Botanix Pharmaceuticals.

That equity raising lands after a sharp reset in sentiment, with a 1 day share price return showing a 41.33% decline at the latest A$0.066 close and a 1 year total shareholder return of 86.80% decline, signalling momentum has been fading rather than building.

If this type of dilution risk has you thinking about where else capital is flowing in healthcare, it could be worth scanning 10 healthcare AI stocks as a starting list of potential ideas.

With A$45 million of fresh equity coming in at A$0.06 a share and a long term share price slide already in the books, the real question now is whether Botanix is on sale or if the market already reflects its growth prospects.

Preferred Price to Sales Multiple of 22.5x: Is it justified?

On Simply Wall St estimates, Botanix looks cheap relative to an A$0.40 future cash flow value, yet the current P/S of 22.5x tells a more nuanced story.

The P/S ratio compares the company’s market value to its annual revenue. A 22.5x multiple means investors are paying A$22.50 in market value for every A$1 of reported sales. For an early stage, loss making pharmaceutical business with limited current revenue and a developing product portfolio, investors often focus more on what future sales could look like rather than today’s A$5.79m revenue and current net loss of A$86.40m.

Relative to peers, Botanix sits in a middle ground. Its 22.5x P/S is below the Australian pharmaceuticals industry average of 30.9x, which suggests the market is not assigning the same revenue multiple as the broader group. At the same time, it is above both the peer average of 14.8x and the estimated fair P/S ratio of 19.2x, so the market price still implies a richer revenue tag than those benchmarks and leaves room for that multiple to compress if sentiment cools or expectations reset.

Explore the SWS fair ratio for Botanix Pharmaceuticals

Result: Price to sales ratio of 22.5x (ABOUT RIGHT)

However, you still need to weigh serious risks, including ongoing losses of A$86.40m and the possibility that new equity at A$0.06 continues to pressure sentiment.

Find out about the key risks to this Botanix Pharmaceuticals narrative.

Another Angle on Value

Our DCF model paints a very different picture, with Botanix trading around A$0.07 compared with an estimated future cash flow value of A$0.40, which implies a large discount. If the market is this cautious while the model is this optimistic, which side do you trust more?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Botanix Pharmaceuticals for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 10 high quality undervalued stocks. If you save a screener we even alert you when new companies match – so you never miss a potential opportunity.

Next Steps

If this mix of dilution risk, rich P/S and DCF upside feels conflicted, act while sentiment is still resetting by weighing both sides through 2 key rewards and 3 important warning signs.

Looking for more investment ideas?

If you are weighing what to do next after Botanix, it makes sense to line up a few other options so you are not caught short on ideas.

This article by Simply Wall St is general in nature. We provide commentary based on historical data
and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your
financial situation. We aim to bring you long-term focused analysis driven by fundamental data.
Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
Simply Wall St has no position in any stocks mentioned.

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