Value
5.8/10data confidence 67%| Component | Sub-score |
|---|---|
| P/E | 4.6 |
| P/S | 0.0 |
| Fwd P/E | 6.3 |
| PEG | 10.0 |
- ▸Forward P/E: 20.5x
- ▸PEG: 0.10
XOMA · Why this verdict
Why XOMA Royalty (XOMA) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score5.6/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
The engine classifies XOMA as speculative given its status as a binary biotech industry name, where single trial or regulatory events tied to its royalty portfolio can drive large price swings. Suitability rationale | The stock should avoid a single-event price swing of more than 30% over the next 12 months if binary risk stays contained. | →Stable |
| CounterBinary risk is inherent to a royalty portfolio built on clinical-stage and newly-launched drugs and cannot be diversified away at the single-stock level. | ||
XOMA Royalty posts an excellent return on equity of 34% and strong margins of 70%, reflecting its capital-light royalty business model. Quality breakdown | Return on equity should stay above 20% and margins should hold near 70% over the next 12 months if the royalty model continues to perform. | →Stable |
| CounterHigh ROE and margins for a royalty aggregator can be volatile quarter to quarter depending on which underlying drug royalties are recognized. | ||
Despite strong margins, XOMA shows an earnings-quality red flag with free cash flow at -39% of net income and a failed Rule of 40 score of -50. Quality breakdown | The FCF-to-net-income ratio should rise toward 0% or higher over the next 12 months if earnings quality is improving. | →Stable |
| CounterA royalty aggregator's free cash flow can lag reported net income due to the timing of milestone and royalty-acquisition payments rather than reflecting weak core earnings quality. | ||
XOMA Royalty has beaten consensus EPS estimates in all of its last 4 reported quarters, a perfect beat streak. Earnings | The company should beat or meet consensus estimates at the next report if the execution track record continues. | →Stable |
| CounterA royalty-aggregator biotech can post beats driven by lumpy milestone payments rather than a repeatable operating pattern, and a single miss would break the streak. | ||
The stock has already reached its analyst price target, leaving the engine's V8 check showing negative implied upside of 22.9%. Warnings | The stock's upside to analyst target should improve back above -10% over the next 12 months if the price and target realign. | →Stable |
| CounterAnalyst targets for a royalty aggregator can lag a re-rating following a strong beat streak and simply need time to catch up. | ||
The engine classifies XOMA as speculative given its status as a binary biotech industry name, where single trial or regulatory events tied to its royalty portfolio can drive large price swings.
→StableSuitability rationale
- Expectation
- The stock should avoid a single-event price swing of more than 30% over the next 12 months if binary risk stays contained.
CounterBinary risk is inherent to a royalty portfolio built on clinical-stage and newly-launched drugs and cannot be diversified away at the single-stock level.
XOMA Royalty posts an excellent return on equity of 34% and strong margins of 70%, reflecting its capital-light royalty business model.
→StableQuality breakdown
- Expectation
- Return on equity should stay above 20% and margins should hold near 70% over the next 12 months if the royalty model continues to perform.
CounterHigh ROE and margins for a royalty aggregator can be volatile quarter to quarter depending on which underlying drug royalties are recognized.
Despite strong margins, XOMA shows an earnings-quality red flag with free cash flow at -39% of net income and a failed Rule of 40 score of -50.
→StableQuality breakdown
- Expectation
- The FCF-to-net-income ratio should rise toward 0% or higher over the next 12 months if earnings quality is improving.
CounterA royalty aggregator's free cash flow can lag reported net income due to the timing of milestone and royalty-acquisition payments rather than reflecting weak core earnings quality.
XOMA Royalty has beaten consensus EPS estimates in all of its last 4 reported quarters, a perfect beat streak.
→StableEarnings
- Expectation
- The company should beat or meet consensus estimates at the next report if the execution track record continues.
CounterA royalty-aggregator biotech can post beats driven by lumpy milestone payments rather than a repeatable operating pattern, and a single miss would break the streak.
The stock has already reached its analyst price target, leaving the engine's V8 check showing negative implied upside of 22.9%.
→StableWarnings
- Expectation
- The stock's upside to analyst target should improve back above -10% over the next 12 months if the price and target realign.
CounterAnalyst targets for a royalty aggregator can lag a re-rating following a strong beat streak and simply need time to catch up.
TrendMatrix Research · core thesis
Engine thesis — one sentence
XOMA Royalty carries a perfect 4-for-4 earnings beat streak and excellent returns (34% ROE, 70% margins), but negative free cash flow, a failed Rule of 40, and a price already well past the analyst target temper the case in a binary biotech setup.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
5.6/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 10.0 |
| ROA | 0.9 |
| Gross margin | 10.0 |
| Op margin | 0.0 |
| Net margin | 10.0 |
| Current ratio | 9.4 |
| FCF quality | 0.0 |
| Moat | 5.8 |
| Rule of 40 | 3.0 |
| Piotroski F | 6.7 |
- ▸Excellent ROE: 34%
- ▸Strong margins: 70%
- ▸Earnings quality RED FLAG: -39% FCF/NI
- ▸Rule of 40: -50 (fail)
Growth
5.0/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 0.0 |
| EPS growth | 10.0 |
- ▸Declining revenue: -23%
Momentum
6.8/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 3.2 |
| MACD | 10.0 |
| OBV | 10.0 |
| MA position | 9.0 |
| Volume | 1.7 |
- ▸Overbought (RSI 95)
- ▸Volume accumulation (rising OBV)
- ▸Above 200-day MA
Sentiment
4.4/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 5.0 |
| Price target | 3.1 |
| erm sentiment | 5.0 |
- ▸Below analyst target
Insider
7.5/10data confidence 50%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 10.0 |
- ▸No net insider activity — $0 (0.000% of mkt cap)
- ▸Institutions accumulating
Peer rank
4.3/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 3.9 |
| quality rank | 9.4 |
| growth rank | 2.5 |
- ▸Superior ROE vs peers
- ▸Best-in-class margins
Technical
3.4/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 0.0 |
| support resistance | 0.2 |
| 52w position | 10.0 |
Risk (lower is worse)
5.2/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 5.4 |
| days to cover | 1.6 |
| volatility | 9.3 |
| put call | 10.0 |
| implied vol | 0.0 |
| max pain risk | 3.0 |
| beta | 7.8 |
| debt equity | 4.8 |
- ▸High IV: 167%
- ▸Above max pain $25
Catalyst
7.5/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 10.0 |
- ▸Perfect beat streak: 4Q
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (6)
- MOMENTUM:6.8>=5.5
- INSIDER:OK
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:37d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:-2.8=NEGATIVE
Warning (1)
- 8K_CSUITE_CHANGE:5.02 (officer departure/appointment)
Reward-to-Risk
-2.84
Upside
-26.2%
Downside
9.2%
Sizing output
AVOID
Setup— — No clear chart pattern; technical signals are mixed
EdgeNo clear edge — No clear edge identified
SuitabilitySpeculative — Binary industry: Biotechnology
Investment implication
The F-path SELL output reflects an overall score of 5.1 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Insider at 7.5) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( ASYMMETRY:-2.8=NEGATIVE) reinforce the read. Current asymmetry R:R is -2.84 — supplementary context, not the trigger for this path.
The strongest dimensions are Insider at 7.5, Catalyst at 7.5, and Momentum at 6.8; the weakest are Technical at 3.4, Peer rank at 4.3, and Sentiment at 4.4. The V9 engine flagged 1 failed gate with 1 warning, producing an asymmetric reward-to-risk of -2.84 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Perfect Earnings Beat Streak
Trip ifThe beat streak drops to less than 4 consecutive quarters after the next earnings report.
- P2Excellent Roe Strong Margins
Trip ifReturn on equity falls below 15% from the current 34%, ending the excellent-ROE read.
- P3Negative Fcf Rule Of 40 Fail
Trip ifFCF-to-net-income ratio rises above 0% from the current -39%, resolving the earnings-quality red flag.
- P4Analyst Target Reached Limited Upside
Trip ifThe stock's upside to analyst target exceeds 10%, reversing the current -22.9% overshoot.
- P5Binary Biotech Speculative Risk
Trip ifThe stock swings by more than 50% around a single binary catalyst event, confirming the binary-biotech risk.