The price risk of investing in MannKind Corporation appears to be slightly lower, according to analysts at Jefferson Research. However, they still rate the drug maker as Hold because of mixed metrics. They say MannKind’s earnings and cash flow quality are strong, but weak operating efficiency and balance sheet quality offset those strengths.

MannKind's Earnings Quality Weakens Slightly: Analysts

MannKind’s earnings quality edges down

In Jefferson’s report, the firm’s analyst bumped MannKind’s earnings quality down slightly from Strongest to Strong. The company’s net income rose a bit in the last quarter to a loss of $36 million from the previous loss of $73 million. However, the analysts say the quality of that net income fell. They note that the company’s operating cash flow did increase from -$23 million to $100 million. (All graphs are courtesy Jefferson Research)

MannKind’s cash flow quality improves

The Jefferson analysts say the quality of MannKind’s cash flow significantly improved during the quarter rising from Weak to Strong. The drug maker reported $90 million in quarterly cash flow and posted an adjusted number that included 103.3% of reported cash flow.

Additionally, the company’s quarterly operating cash flow quality improved as the number rose to $100 million and, on an adjusted basis, included 103% of the reported amount. The Jefferson team gave these two factors as the reasons for the improvement in MannKind’s cash flow quality. In the last quarter, they say the ratio of reported to adjusted numbers was lower.

MannKind’s operating efficiency remains Weak

The Jefferson team reported no change in the quality rating of the company’s operating efficiency. The main reason they give for rating it at Weak is because of how fast MannKind converts its assets into revenue, along with the percentage that’s left in cash flow and earnings after the company has paid its expenses.

MannKind’s balance sheet quality improves slightly

The Jefferson team raised the quality rating of MannKind’s balance sheet from Weakest to Weak for the third quarter. The analysts say this metric shows the drug maker’s ability to pay bills and invest in growth initiatives. To come up with this rating, they factor in the quick and current ratios, the company’s cash position, accounts receivables days outstanding and the number of days inventory is held before being sold to customers.

MannKind’s overall rating remains unchanged

In their report, Jefferson analysts said they continue to classify MannKind in the Least Risk category. The reason for this classification is because they see lower risk for the company’s shares to move downward. They say MannKind’s price multiple is lower than the average of its sector. To come up with this rating, they look at price to earnings ratio and growth, price to sales and price to cash flow.

Shares of MannKind rose more than 2% during regular trading hours today.

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