Marrone Bio Innovations, Inc. (MBII) discovers, develops, and commercializes naturally derived technologies for pest management and plant health products used in agricultural, turf and ornamental, and water treatment applications. The Davis, Calif., company announced on September 28 that it is advancing three novel bioherbicides in its research and development pipeline. However, the stock has declined 36.6% in price over the past three months to close yesterday’s trading session at $0.93.

The company has a history of long-term share price weakness. The stock has lost 46.8% over the past three years and 45.5% over the past five years. 

MBII announced in February 2021 that it had filed a ‘universal shelf’ registration statement with the SEC, under which it may sell various securities from time to time over three years. While this could help the company raise capital, it could also lead to share dilution. Furthermore, analysts recently made a significant negative revision to their near-term EPS estimates for MBII. So, its near-term prospects look bleak.

Here are the factors that could shape MBII’s performance in the coming months:

Extreme Weather Conditions and Supply Chain Constraints

Extreme weather conditions, such as frequent wildfires in California and heavy rainfall nationwide, have been impacting crop production. According to the National Weather Service in Sacramento, Calif., critical fire weather conditions are possible this week. Moreover, labor shortages have been fostering challenging supply chain conditions, hampering the food services industry. MBII’s revenues in the second quarter were held back by severe drought in the Western United States, supply chain issues, and COVID-19 related constraints. Because these conditions are expected to persist in the near term, the company’s revenue could continue to be negatively impacted.

Weak Financials

For the second quarter, ended June 30, 2021, MBII’s product revenues increased 3.4% year-over-year to $12.48 million, while its license revenue increased 6.1% year-over-year to $122,000. However, the company’s total operating expenses increased 7.8% year-over-year to $10.12 million. Its loss from operations came in at $2.36 million, representing a 17.4% year-over-year rise. While its net loss in the quarter was $3.04 million, up 5.7% year-over-year, its loss per share remained flat at $0.02.

Poor Profitability

In terms of trailing-12-month EBITDA margin, MBII’s negative 28.33% compares with the 19.51% industry average. Likewise, the stock’s trailing-12-month ROCE, ROTC, and ROTA are negative compared to the industry averages of 12.35%, 6.93%, and 5.27%, respectively. Also, its trailing-12-month net income margin is negative compared to the 8.23% industry average.

POWR Ratings Reflect Bleak Prospects

MBII has an overall D rating, which equates to Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight different categories. MBII has a D grade for Growth, which is in sync with analysts’ expectations that its EPS will remain negative in fiscal 2021 and 2022.

The stock has a D grade for Value, which is consistent with its 3.95x forward EV/S, which is 133.7% higher than the 1.69x industry average. In addition, MBII’s 3.64x forward P/S is 155.7% higher than the 1.43x industry average.

MBII is ranked #84 out of 93 stocks in the Chemicals industry. Also, click here to see MBII’s ratings for Momentum, Stability, Sentiment, and Quality.

Bottom Line

MBII has a robust patent portfolio, more than 18,000 microorganisms, and hundreds of plant extracts screened for pipeline candidates. However, it is currently trading below its 50-day and 200-day moving averages of $0.95 and $1.45, respectively, indicating a downtrend. It could keep losing in the near term as challenging weather and supply chain constraints persist. So, we think the stock is best avoided now.

How Does Marrone Bio Innovations (MBII) Stack Up Against its Peers?

While MBII has an overall POWR Rating of D, one could check out these other stocks within the Chemicals industry with an A (Strong Buy) rating: AGC Inc. (ASGLY), Mitsubishi Chemical Holdings Corporation (MTLHY), and Arkema S.A. (ARKAY).

MBII shares were trading at $0.95 per share on Monday morning, up $0.02 (+1.98%). Year-to-date, MBII has declined -24.00%, versus a 18.77% rise in the benchmark S&P 500 index during the same period.

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.

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