Trying to accurately value a biotech stock isn't just difficult -- sometimes it seems downright worthless. After all, how can investors even try to value a company that hasn't booked a dollar in revenue?

In the following video, Brenton Flynn walks through a commonly used method for valuing biotech stocks and offers a word of caution for investors in companies like Arena Pharmaceuticals (NASDAQ:ARNA), Threshold Pharmaceuticals (NASDAQ:THLD), and Pharmacyclics (NASDAQ:PCYC), which are waiting on lucrative milestone payments.

Brenton Flynn has no position in any stocks mentioned. The Motley Fool recommends Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.