Buy or Sell Harrow Stock?

Harrow (HROW) stock has fallen 7.8% during the past day, and is currently trading at $36.17. We believe there are only a couple of things to fear in HROW stock given its overall Strong operating performance and financial condition. This is aligned with the stock’s High valuation because of which we think it is Fairly Priced.

Below is our assessment:

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Let’s get into details of each of the assessed factors but before that, for quick background: With $1.3 Bil in market cap, Harrow is an ophthalmology outsourcing and pharmaceutical compounding provider, holding equity in a clinical-stage company developing therapeutics for ocular surface diseases.

[1] Valuation Looks High

This table highlights how HROW is valued vs broader market. For more details see: HROW Valuation Ratios

[2] Growth Is Very Strong

• Harrow has seen its top line grow at an average rate of 41.7% over the last 3 years
• Its revenues have grown 48% from $169 Mil to $250 Mil in the last 12 months
• Also, its quarterly revenues grew 45.4% to $72 Mil in the most recent quarter from $49 Mil a year ago.

This table highlights how HROW is growing vs broader market. For more details see: HROW Revenue Comparison

[3] Profitability Appears Very Weak

• HROW last 12 month operating income was $28 Mil representing operating margin of 11.2%
• With cash flow margin of 7.1%, it generated nearly $18 Mil in operating cash flow over this period
• For the same period, HROW generated nearly $-5.0 Mil in net income, suggesting net margin of about -2.0%

This table highlights how HROW profitability vs broader market. For more details see: HROW Operating Income Comparison

[4] Financial Stability Looks Very Strong

• HROW Debt was $252 Mil at the end of the most recent quarter, while its current Market Cap is $1.3 Bil. This implies Debt-to-Equity Ratio of 18.6%
• HROW Cash (including cash equivalents) makes up $74 Mil of $363 Mil in total Assets. This yields a Cash-to-Assets Ratio of 20.5%

[5] Downturn Resilience Is Very Weak

HROW has fared worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• HROW stock fell 71.2% from a high of $28.08 on 9 May 2023 to $8.10 on 15 November 2023 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 8 August 2024
• Since then, the stock increased to a high of $57.48 on 20 October 2024 , and currently trades at $36.17

 
2020 Covid Pandemic

• HROW stock fell 55.0% from a high of $7.78 on 1 January 2020 to $3.50 on 23 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 5 January 2021

 
2008 Global Financial Crisis

• HROW stock fell 84.1% from a high of $138.00 on 4 October 2007 to $22.00 on 4 December 2008 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• The stock is yet to recover to its pre-Crisis high

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read HROW Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.