IMRN

We rate Immuron Ltd (IMRN) as Avoid with a composite score of 35.5/100 at a current price of $0.76. The stock falls in the bottom quintile of our universe across key quantitative factors, and the multi-factor weakness suggests a high probability of continued underperformance.

The rating is primarily driven by strength in investment (63th percentile) and stability (56th percentile), which together account for the majority of the composite score. Offsetting weakness in value (8th percentile) and momentum (9th percentile) tempers our overall conviction. We assign a Narrow Moat rating (40/100), Medium uncertainty, and Poor capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs; sustainability of the current growth rate; the path to profitability. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Immuron Ltd holds a top-quartile position (#0 of 50) within the Manufacturing sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 35.5/100 places it at rank #4059 in our full 7,333-stock universe. At $10M in market capitalization, Immuron Ltd is a small-cap player in the Manufacturing space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue is growing at 46%, though momentum at the 9th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 65% (+22.9pp vs sector) narrow to operating margins of -73% (-74.6pp vs sector) and net margins of -71.6%, yielding a gross-to-net conversion rate of -109%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $0.76, Immuron Ltd is trading at a premium to fundamental value. Our value factor score of 8/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The premium valuation implies the market is pricing in significant future growth or quality improvements that are not yet fully reflected in current fundamentals.

The stock currently trades at P/B of 1.1x, P/S of 0.3x. We evaluate these multiples in the context of both absolute levels and sector-relative positioning to form our valuation view.

We assign a Medium uncertainty rating to Immuron Ltd. The stock presents a balanced risk profile: current negative profitability (net margin -71.6%) and low beta of 0.50 — while defensive, this may indicate limited upside participation in bull markets. While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: current negative profitability (net margin -71.6%); low beta of 0.50 — while defensive, this may indicate limited upside participation in bull markets. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 56th percentile and quality factor at the 42th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 65% provide a buffer against cost pressures; conservative leverage (0% D/E) limits balance sheet risk. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate Immuron Ltd's capital allocation as Poor. Key concerns include low returns on equity (-258.6%), negative profitability, weak asset returns (ROA -206.0%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — Immuron Ltd significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, Immuron Ltd receives a Avoid rating with a composite score of 35.5/100 (rank #4059 of 7,333). Our quantitative framework assigns a Narrow Moat (40/100, trend: stable), Medium uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 35/100.

Our analysis does not support a constructive view on Immuron Ltd at this time. The combination of the current quantitative profile, medium uncertainty, and poor capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.