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Ligand Pharmaceuticals Inc Valuation – September 2018 $LGND

Company Profile (excerpt from Reuters): Ligand Pharmaceuticals Incorporated (Ligand), incorporated on September 28, 1987, is a biopharmaceutical company that focuses on developing and acquiring technologies that help pharmaceutical companies discover and develop medicines. The Company is involved in the development and licensing of biopharmaceutical assets. The Company employs research technologies, such as nuclear receptor assays, high throughput computer screening, formulation science, liver targeted pro-drug technologies and antibody discovery technologies to assist companies in their work towards obtaining prescription drug approvals. As of December 31, 2016, it had partnerships and license agreements with over 85 pharmaceutical and biotechnology companies, and over 140 various programs under license with it were in various stages of commercialization and development. It has contributed research and technologies for approved medicines that treat cancer, osteoporosis, fungal infections and low blood platelets, among others. Its partners have programs in clinical development targeting seizure, coma, cancer, diabetes, cardiovascular disease, muscle wasting, liver disease and kidney disease, among others. The Company is developing a small molecule glucagon receptor antagonist for the treatment of Type II diabetes mellitus.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LGND – September 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $5,371,771,546 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.34 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -5378.57% Fail
6. Moderate PEmg Ratio PEmg < 20 64.93 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 10.04 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.34 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.70 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.92
MG Growth Estimate 15.00%
MG Value $150.92
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $56.84
MG Value based on 0% Growth $33.32
Market Implied Growth Rate 28.22%
Current Price $254.54
% of Intrinsic Value 168.66%

Ligand Pharmaceuticals Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the lack of earnings stability over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $0.36 in 2014 to an estimated $3.92 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 28.22% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Ligand Pharmaceuticals Inc. revealed the company was trading above its Graham Number of $54.33. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 64.93, which was above the industry average of 41.98. Finally, the company was trading above its Net Current Asset Value (NCAV) of $9.9.

Ligand Pharmaceuticals Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $9.90
Graham Number $54.33
PEmg 64.93
Current Ratio 2.34
PB Ratio 10.04
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $1,480,470,000
Total Current Liabilities $632,850,000
Long-Term Debt $595,912,000
Total Assets $1,858,284,000
Intangible Assets $328,399,000
Total Liabilities $1,238,471,000
Shares Outstanding (Diluted Average) 24,438,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.94
Dec2017 $0.53
Dec2016 -$0.08
Dec2015 $10.83
Dec2014 $0.56
Dec2013 $0.55
Dec2012 -$0.03
Dec2011 $0.49
Dec2010 -$0.53
Dec2009 -$0.10
Dec2008 -$6.18
Dec2007 $17.22
Dec2006 -$2.34
Dec2005 -$2.94
Dec2004 -$3.66
Dec2003 -$8.16
Dec2002 -$4.56
Dec2001 -$4.32
Dec2000 -$8.10
Dec1999 -$9.48
Dec1998 -$17.52

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.92
Dec2017 $2.43
Dec2016 $3.04
Dec2015 $3.90
Dec2014 $0.36
Dec2013 $0.20
Dec2012 -$0.41
Dec2011 $0.33
Dec2010 $0.70
Dec2009 $1.25
Dec2008 $1.43
Dec2007 $3.50
Dec2006 -$3.69
Dec2005 -$4.48
Dec2004 -$5.42
Dec2003 -$6.51
Dec2002 -$6.72

Recommended Reading:

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Ligand Pharmaceuticals Inc Valuation – Initial Coverage $LGND

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Ligand Pharmaceuticals Inc Valuation – Initial Coverage $LGND

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – March 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Ligand Pharmaceuticals Inc (LGND) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Ligand Pharmaceuticals Incorporated (Ligand) is a biopharmaceutical company that focuses on developing and acquiring technologies that help pharmaceutical companies discover and develop medicines. The Company employs research technologies, such as nuclear receptor assays, high throughput computer screening, formulation science, liver targeted pro-drug technologies and antibody discovery technologies to assist companies in their work toward obtaining prescription drug approvals. It has have partnerships and license agreements with over 85 pharmaceutical and biotechnology companies, and over 140 different programs under license with it are in various stages of commercialization and development. Its partners have programs in clinical development targeting seizure, coma, cancer, diabetes, cardiovascular disease, muscle wasting, liver disease and kidney disease, among others. It is developing a small molecule glucagon receptor antagonist for the treatment of Type II diabetes mellitus.

LGND Chart

LGND data by YCharts

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of LGND – March 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $2,269,811,026 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.72 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -298.12% Fail
6. Moderate PEmg Ratio PEmg < 20 33.91 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.56 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.72 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $3.17
MG Growth Estimate 15.00%
MG Value $122.02
Opinion Fairly Valued
MG Grade D
MG Value based on 3% Growth $45.96
MG Value based on 0% Growth $26.94
Market Implied Growth Rate 12.70%
Current Price $107.47
% of Intrinsic Value 88.08%

Ligand Pharmaceuticals Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $0.2 in 2013 to an estimated $3.17 for 2017. This level of demonstrated earnings growth supports the market’s implied estimate of 12.7% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Ligand Pharmaceuticals Inc. revealed the company was trading above its Graham Number of $31.73. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 33.91, which was above the industry average of 28.95. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-4.67.

Ligand Pharmaceuticals Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$4.67
Graham Number $31.73
PEmg 33.91
Current Ratio 0.72
PB Ratio 6.56
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $163,053,000
Total Current Liabilities $227,129,000
Long-Term Debt $0
Total Assets $601,585,000
Intangible Assets $302,733,000
Total Liabilities $260,295,000
Shares Outstanding (Diluted Average) 20,831,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.74
Dec2016 -$0.08
Dec2015 $10.83
Dec2014 $0.56
Dec2013 $0.55
Dec2012 -$0.03
Dec2011 $0.49
Dec2010 -$0.53
Dec2009 -$0.10
Dec2008 -$6.18
Dec2007 $17.22
Dec2006 -$2.34
Dec2005 -$2.94
Dec2004 -$3.66
Dec2003 -$8.16
Dec2002 -$4.56
Dec2001 -$4.32
Dec2000 -$8.10
Dec1999 -$9.48
Dec1998 -$17.52
Dec1997 -$18.12

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.17
Dec2016 $3.04
Dec2015 $3.90
Dec2014 $0.36
Dec2013 $0.20
Dec2012 -$0.41
Dec2011 $0.33
Dec2010 $0.70
Dec2009 $1.25
Dec2008 $1.43
Dec2007 $3.50
Dec2006 -$3.69
Dec2005 -$4.48
Dec2004 -$5.42
Dec2003 -$6.51
Dec2002 -$6.72
Dec2001 -$9.04

Recommended Reading:

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None. This is the first time ModernGraham has covered the company.

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Incyte Corp Valuation – February 2019 $INCY

Company Profile (excerpt from Reuters): Incyte Corporation, incorporated on April 8, 1991, is a biopharmaceutical company. The Company is focused on the discovery, development and commercialization of therapeutics. The Company’s portfolio includes compounds in various stages, ranging from preclinical to late-stage development, and commercialized products, such as JAKAFI (ruxolitinib) and ICLUSIG (ponatinib). The Company has initiated REACH1, a pivotal Phase II trial in steroid-refractory acute graft-versus-host-disease (GVHD) and the first in a registration program for ruxolitinib in GVHD. A proof-of-concept trial of itacitinib, a selective janus associated kinases 1 (JAK1) inhibitor, is ongoing for the treatment of patients with acute GVHD.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of INCY – February 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $17,967,189,642 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.31 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -89.95% Fail
6. Moderate PEmg Ratio PEmg < 20 482.41 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 9.41 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 4.31 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.01 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.17
MG Growth Estimate 15.00%
MG Value $6.70
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $2.52
MG Value based on 0% Growth $1.48
Market Implied Growth Rate 236.96%
Current Price $83.94
% of Intrinsic Value 1253.02%

Incyte Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the lack of earnings stability over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $-0.32 in 2015 to an estimated $0.17 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 236.96% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Incyte Corporation revealed the company was trading above its Graham Number of $12.83. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 482.41, which was above the industry average of 39.51. Finally, the company was trading above its Net Current Asset Value (NCAV) of $5.15.

Incyte Corporation scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $5.15
Graham Number $12.83
PEmg 482.41
Current Ratio 4.31
PB Ratio 9.41
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $1,832,254,000
Total Current Liabilities $425,277,000
Long-Term Debt $17,434,000
Total Assets $2,645,762,000
Intangible Assets $370,957,000
Total Liabilities $719,795,000
Shares Outstanding (Diluted Average) 215,992,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.81
Dec2018 $0.51
Dec2017 -$1.53
Dec2016 $0.54
Dec2015 $0.03
Dec2014 -$0.29
Dec2013 -$0.56
Dec2012 -$0.34
Dec2011 -$1.49
Dec2010 -$0.26
Dec2009 -$2.06
Dec2008 -$1.99
Dec2007 -$1.03
Dec2006 -$0.89
Dec2005 -$1.24
Dec2004 -$2.21
Dec2003 -$2.33
Dec2002 -$2.03
Dec2001 -$2.77
Dec2000 -$0.47
Dec1999 -$0.48

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.17
Dec2018 -$0.15
Dec2017 -$0.44
Dec2016 $0.03
Dec2015 -$0.32
Dec2014 -$0.53
Dec2013 -$0.75
Dec2012 -$0.97
Dec2011 -$1.31
Dec2010 -$1.23
Dec2009 -$1.62
Dec2008 -$1.43
Dec2007 -$1.28
Dec2006 -$1.52
Dec2005 -$1.92
Dec2004 -$2.16
Dec2003 -$1.97

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Incyte Corp Valuation – April 2018 $INCY

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Merck & Co Inc Valuation – November 2018 $MRK
Ligand Pharmaceuticals Inc Valuation – September 2018 $LGND

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Regeneron Pharmaceuticals Inc Valuation – February 2019 $REGN

Company Profile (excerpt from Reuters): Regeneron Pharmaceuticals, Inc., incorporated on January 11, 1988, is a biopharmaceutical company that discovers, invents, develops, manufactures and commercializes medicines for the treatment of serious medical conditions. The Company commercializes medicines for eye diseases, high low-density lipoprotein (LDL) cholesterol, and an inflammatory condition and have product candidates in development in other areas, including rheumatoid arthritis, asthma, atopic dermatitis, pain, cancer, and infectious diseases. The Company’s marketed products include EYLEA (aflibercept) Injection, Praluent (alirocumab) Injection, ARCALYST (rilonacept) Injection for Subcutaneous Use, Kevzara (sarilumab) Solution for Subcutaneous Injection and ZALTRAP (ziv-aflibercept) Injection for intravenous infusion. As of December 31, 2016, the Company had 16 product candidates in clinical development, which consisted of a Trap-based clinical program and 15 fully human monoclonal antibody product candidates. Its antibodies are generated using its VelocImmune technology.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of REGN – February 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $45,297,630,364 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.47 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 1470.07% Pass
6. Moderate PEmg Ratio PEmg < 20 29.08 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.52 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 4.47 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $14.51
MG Growth Estimate 15.00%
MG Value $558.51
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $210.35
MG Value based on 0% Growth $123.31
Market Implied Growth Rate 10.29%
Current Price $421.90
% of Intrinsic Value 75.54%

Regeneron Pharmaceuticals Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $4.12 in 2015 to an estimated $14.51 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 10.29% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Regeneron Pharmaceuticals Inc revealed the company was trading above its Graham Number of $170.59. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 29.08, which was below the industry average of 39.51, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $30.26.

Regeneron Pharmaceuticals Inc receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $30.26
Graham Number $170.59
PEmg 29.08
Current Ratio 4.47
PB Ratio 5.52
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $6,447,600,000
Total Current Liabilities $1,442,800,000
Long-Term Debt $0
Total Assets $11,734,500,000
Intangible Assets $0
Total Liabilities $2,977,200,000
Shares Outstanding (Diluted Average) 114,671,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $16.10
Dec2018 $21.29
Dec2017 $10.34
Dec2016 $7.70
Dec2015 $5.52
Dec2014 $2.98
Dec2013 $3.72
Dec2012 $6.75
Dec2011 -$2.45
Dec2010 -$1.26
Dec2009 -$0.85
Dec2008 -$1.00
Dec2007 -$1.59
Dec2006 -$1.77
Dec2005 -$1.71
Dec2004 $0.74
Dec2003 -$2.13
Dec2002 -$2.83
Dec2001 -$1.81
Dec2000 -$0.66
Dec1999 -$0.74

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $14.51
Dec2018 $12.33
Dec2017 $7.25
Dec2016 $5.58
Dec2015 $4.12
Dec2014 $2.92
Dec2013 $2.33
Dec2012 $1.16
Dec2011 -$1.56
Dec2010 -$1.18
Dec2009 -$1.22
Dec2008 -$1.29
Dec2007 -$1.39
Dec2006 -$1.37
Dec2005 -$1.30
Dec2004 -$1.17
Dec2003 -$1.96

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Regeneron Pharmaceuticals Inc Valuation – April 2018 $REGN
Regeneron Pharmaceuticals Inc Valuation – November 2016 $REGN
Regeneron Pharmaceuticals Inc Valuation – August 2016 $REGN
Regeneron Pharmaceuticals Inc. Annual Valuation – 2015 $REGN
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Gilead Sciences Inc Valuation – January 2019 $GILD
Pfizer Inc Valuation – November 2018 $PFE
Nektar Therapeutics Valuation – November 2018 $NKTR
Merck & Co Inc Valuation – November 2018 $MRK
Ligand Pharmaceuticals Inc Valuation – September 2018 $LGND

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Alexion Pharmaceuticals Inc Valuation – February 2019 $ALXN

Company Profile (excerpt from Reuters): Alexion Pharmaceuticals, Inc., incorporated on January 28, 1992, is a biopharmaceutical company. The Company is focused on the development and commercialization of therapeutic products. The Company’s products include Soliris (eculizumab), Strensiq (asfotase alfa) and Kanuma (sebelipase alfa). The Company’s clinical development programs include Soliris (eculizumab), cPMP (ALXN1101), SBC-103, ALXN1210 (IV) and ALXN1210 (Subcutaneous).

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ALXN – February 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $28,604,032,000 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.88 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 314.76% Pass
6. Moderate PEmg Ratio PEmg < 20 34.23 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.15 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.88 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.13 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.74
MG Growth Estimate 15.00%
MG Value $143.99
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $54.23
MG Value based on 0% Growth $31.79
Market Implied Growth Rate 12.86%
Current Price $128.02
% of Intrinsic Value 88.91%

Alexion Pharmaceuticals, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.58 in 2015 to an estimated $3.74 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 12.86% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Alexion Pharmaceuticals, Inc. revealed the company was trading above its Graham Number of $90.72. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 34.23, which was below the industry average of 39.51, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-6.13.

Alexion Pharmaceuticals, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$6.13
Graham Number $90.72
PEmg 34.23
Current Ratio 2.88
PB Ratio 3.15
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $3,385,000,000
Total Current Liabilities $1,174,000,000
Long-Term Debt $2,501,700,000
Total Assets $13,931,900,000
Intangible Assets $8,678,700,000
Total Liabilities $4,766,600,000
Shares Outstanding (Diluted Average) 225,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $8.92
Dec2018 $0.35
Dec2017 $1.97
Dec2016 $1.76
Dec2015 $0.67
Dec2014 $3.26
Dec2013 $1.27
Dec2012 $1.28
Dec2011 $0.91
Dec2010 $0.52
Dec2009 $1.63
Dec2008 $0.20
Dec2007 -$0.64
Dec2006 -$1.04
Jul2005 -$0.98
Jul2004 -$0.86
Jul2003 -$1.16
Jul2002 -$0.78
Jul2001 -$0.82
Jul2000 -$0.36
Jul1999 -$0.14

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.74
Dec2018 $1.30
Dec2017 $1.78
Dec2016 $1.67
Dec2015 $1.58
Dec2014 $1.84
Dec2013 $1.12
Dec2012 $1.00
Dec2011 $0.75
Dec2010 $0.49
Dec2009 $0.26
Dec2008 -$0.50
Dec2007 -$0.88
Dec2006 -$0.98
Jul2005 -$0.94
Jul2004 -$0.88
Jul2003 -$0.82

Recommended Reading:

Other ModernGraham posts about the company

Alexion Pharmaceuticals Inc Valuation – April 2018 $ALXN
Alexion Pharmaceuticals Inc Valuation – December 2016 $ALXN
Alexion Pharmaceuticals Inc. Analysis – August 2015 Update $ALXN
47 Companies in the Spotlight This Week – 5/16/15
Alexion Pharmaceuticals Quarterly Valuation – May 2015 $ALXN

Other ModernGraham posts about related companies

Vertex Pharmaceuticals Inc Valuation – February 2019 $VRTX
Perrigo Company Valuation – February 2019 $PRGO
Eli Lilly and Co Valuation – January 2019 $LLY
Zoetis Inc Valuation – January 2019 $ZTS
Gilead Sciences Inc Valuation – January 2019 $GILD
Pfizer Inc Valuation – November 2018 $PFE
Nektar Therapeutics Valuation – November 2018 $NKTR
Merck & Co Inc Valuation – November 2018 $MRK
Ligand Pharmaceuticals Inc Valuation – September 2018 $LGND
Supernus Pharmaceuticals Inc Valuation – August 2018 $SUPN

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Vertex Pharmaceuticals Inc Valuation – February 2019 $VRTX

Company Profile (excerpt from Reuters): Vertex Pharmaceuticals Incorporated, incorporated on January 4, 1989, is engaged in discovering, developing, manufacturing and commercializing medicines for serious diseases. The Company is focused on developing and commercializing therapies for the treatment of cystic fibrosis (CF) and advancing its research and development programs in other indications. The Company’s marketed medicines are ORKAMBI and KALYDECO. ORKAMBI (lumacaftor in combination with ivacaftor) is approved as a treatment for patients having two copies (homozygous) of the Delta-F508 (F508del) mutation in their cystic fibrosis transmembrane conductance regulator (CFTR) gene. KALYDECO (ivacaftor) is approved for the treatment of CF patients having the G551D mutation or other specified mutations in their CFTR gene.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of VRTX – February 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $47,416,062,908 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 5.17 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -405.57% Fail
6. Moderate PEmg Ratio PEmg < 20 56.08 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 10.89 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 5.17 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.31
MG Growth Estimate 15.00%
MG Value $127.56
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $48.04
MG Value based on 0% Growth $28.16
Market Implied Growth Rate 23.79%
Current Price $185.82
% of Intrinsic Value 145.67%

Vertex Pharmaceuticals Incorporated does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the lack of earnings stability over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $-2.06 in 2015 to an estimated $3.31 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 23.79% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Vertex Pharmaceuticals Incorporated revealed the company was trading above its Graham Number of $36.92. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 56.08, which was above the industry average of 39.51. Finally, the company was trading above its Net Current Asset Value (NCAV) of $7.28.

Vertex Pharmaceuticals Incorporated scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $7.28
Graham Number $36.92
PEmg 56.08
Current Ratio 5.17
PB Ratio 10.89
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $3,702,290,000
Total Current Liabilities $715,482,000
Long-Term Debt $0
Total Assets $6,245,898,000
Intangible Assets $50,384,000
Total Liabilities $1,810,695,000
Shares Outstanding (Diluted Average) 259,812,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.49
Dec2018 $8.09
Dec2017 $1.04
Dec2016 -$0.46
Dec2015 -$2.31
Dec2014 -$3.14
Dec2013 -$1.98
Dec2012 -$0.50
Dec2011 $0.14
Dec2010 -$3.77
Dec2009 -$3.71
Dec2008 -$3.27
Dec2007 -$3.03
Dec2006 -$1.83
Dec2005 -$2.28
Dec2004 -$2.12
Dec2003 -$2.56
Dec2002 -$1.43
Dec2001 -$0.89
Dec2000 -$0.51
Dec1999 -$0.80

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.31
Dec2018 $2.36
Dec2017 -$0.79
Dec2016 -$1.69
Dec2015 -$2.06
Dec2014 -$1.91
Dec2013 -$1.52
Dec2012 -$1.60
Dec2011 -$2.34
Dec2010 -$3.43
Dec2009 -$3.11
Dec2008 -$2.71
Dec2007 -$2.41
Dec2006 -$2.08
Dec2005 -$2.09
Dec2004 -$1.83
Dec2003 -$1.53

Recommended Reading:

Other ModernGraham posts about the company

Vertex Pharmaceuticals Inc Valuation – April 2018 $VRTX
Vertex Pharmaceuticals Inc Valuation – August 2016 $VRTX
Vertex Pharmaceuticals Analysis – July 2015 Update $VRTX
Vertex Pharmaceuticals Annual Valuation – 2014 $VRTX

Other ModernGraham posts about related companies

Perrigo Company Valuation – February 2019 $PRGO
Eli Lilly and Co Valuation – January 2019 $LLY
Zoetis Inc Valuation – January 2019 $ZTS
Gilead Sciences Inc Valuation – January 2019 $GILD
Pfizer Inc Valuation – November 2018 $PFE
Nektar Therapeutics Valuation – November 2018 $NKTR
Merck & Co Inc Valuation – November 2018 $MRK
Ligand Pharmaceuticals Inc Valuation – September 2018 $LGND
Supernus Pharmaceuticals Inc Valuation – August 2018 $SUPN
Lannett Co Inc Valuation – August 2018 $LCI

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Perrigo Company Valuation – February 2019 $PRGO

Company Profile (excerpt from Reuters): Perrigo Company PLC (Perrigo), formerly Perrigo Company Limited, incorporated on June 28, 2013, is an over-the-counter (OTC) consumer goods and specialty pharmaceutical company. The Company’s segments include Consumer Healthcare (CHC), Branded Consumer Healthcare (BCH), Prescription Pharmaceuticals (Rx) and Specialty Sciences. The Company manufactures OTC healthcare products and supplies infant formulas for the store brand market. It is also a provider of generic extended topical prescription products. It provides healthcare products across a range of product categories and geographies, primarily in North America, Europe and Australia, as well as in other markets, including Israel and China.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PRGO – February 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $6,345,880,345 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.85 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -442.48% Fail
6. Moderate PEmg Ratio PEmg < 20 -9.91 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.13 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.85 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.41 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg -$4.71
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$68.31
MG Value based on 0% Growth -$40.05
Market Implied Growth Rate -9.21%
Current Price $46.71
% of Intrinsic Value N/A

Perrigo Company PLC does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.42 in 2014 to an estimated $-4.71 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Perrigo Company PLC revealed the company was trading above its Graham Number of $34.54. The company pays a dividend of $0.64 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was -9.91, which was below the industry average of 39.51, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-18.3.

Perrigo Company PLC scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$18.30
Graham Number $34.54
PEmg -9.91
Current Ratio 1.85
PB Ratio 1.13
Current Dividend $0.64
Dividend Yield 1.37%
Number of Consecutive Years of Dividend Growth 15

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $2,768,800,000
Total Current Liabilities $1,493,500,000
Long-Term Debt $3,071,000,000
Total Assets $10,942,900,000
Intangible Assets $7,001,300,000
Total Liabilities $5,282,900,000
Shares Outstanding (Diluted Average) 137,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.21
Dec2017 $0.84
Dec2016 -$28.01
Jun2015 $0.97
Jun2014 $2.01
Jun2013 $4.68
Jun2012 $4.27
Jun2011 $3.63
Jun2010 $2.41
Jun2009 $1.54
Jun2008 $1.43
Jun2007 $0.79
Jun2006 $0.76
Jun2005 -$4.57
Jun2004 $1.11
Jun2003 $0.76
Jun2002 $0.60
Jun2001 $0.33
Jun2000 $0.23
Jun1999 $0.02
Jun1998 -$0.69

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$4.71
Dec2017 -$6.42
Dec2016 -$7.77
Jun2015 $2.61
Jun2014 $3.42
Jun2013 $3.85
Jun2012 $3.17
Jun2011 $2.40
Jun2010 $1.66
Jun2009 $0.85
Jun2008 $0.30
Jun2007 -$0.25
Jun2006 -$0.60
Jun2005 -$0.97
Jun2004 $0.75
Jun2003 $0.51
Jun2002 $0.29

Recommended Reading:

Other ModernGraham posts about the company

Perrigo Company PLC Valuation – April 2018 $PRGO
5 of the Worst Stocks to Invest In – August 2016
Perrigo Co PLC Valuation – July 2016 $PRGO
Perrigo Co PLC Valuation – January 2016 Update $PRGO
Perrigo Company PLC Analysis – October 2015 Update $PRGO

Other ModernGraham posts about related companies

Eli Lilly and Co Valuation – January 2019 $LLY
Zoetis Inc Valuation – January 2019 $ZTS
Gilead Sciences Inc Valuation – January 2019 $GILD
Pfizer Inc Valuation – November 2018 $PFE
Nektar Therapeutics Valuation – November 2018 $NKTR
Merck & Co Inc Valuation – November 2018 $MRK
Ligand Pharmaceuticals Inc Valuation – September 2018 $LGND
Supernus Pharmaceuticals Inc Valuation – August 2018 $SUPN
Lannett Co Inc Valuation – August 2018 $LCI
Spectrum Pharmaceuticals Inc Valuation – August 2018 $SPPI

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Eli Lilly and Co Valuation – January 2019 $LLY

Company Profile (excerpt from Reuters): Eli Lilly and Company, incorporated on January 17, 1901, is engaged in drug manufacturing business. The Company discovers, develops, manufactures and markets products in two segments: human pharmaceutical products and animal health products. The Company’s human pharmaceutical business segment sells medicines, which are discovered or developed by its scientists. Its animal health business segment operates through the Company’s Elanco division, which develops, manufactures and markets products for both food animals and companion animals. As of December 31, 2016, the Company manufactured and distributed its products through facilities in the United States, Puerto Rico and 14 other countries.

Downloadable PDF version of this valuation:

ModernGraham Valuation of LLY – January 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $124,957,622,150 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.91 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -53.78% Fail
6. Moderate PEmg Ratio PEmg < 20 58.07 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 8.56 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.91 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.18 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.03
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $29.46
MG Value based on 0% Growth $17.27
Market Implied Growth Rate 24.78%
Current Price $117.99
% of Intrinsic Value N/A

Eli Lilly And Co does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.45 in 2014 to an estimated $2.03 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 24.78% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Eli Lilly And Co revealed the company was trading above its Graham Number of $28.18. The company pays a dividend of $2.08 per share, for a yield of 1.8% Its PEmg (price over earnings per share – ModernGraham) was 58.07, which was above the industry average of 35.4. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-9.54.

Eli Lilly And Co scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$9.54
Graham Number $28.18
PEmg 58.07
Current Ratio 1.91
PB Ratio 8.56
Current Dividend $2.08
Dividend Yield 1.76%
Number of Consecutive Years of Dividend Growth 3

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $20,685,900,000
Total Current Liabilities $10,826,700,000
Long-Term Debt $11,674,700,000
Total Assets $44,625,100,000
Intangible Assets $3,619,400,000
Total Liabilities $30,474,200,000
Shares Outstanding (Diluted Average) 1,026,300,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.35
Dec2017 -$0.19
Dec2016 $2.58
Dec2015 $2.26
Dec2014 $2.23
Dec2013 $4.32
Dec2012 $3.66
Dec2011 $3.90
Dec2010 $4.58
Dec2009 $3.94
Dec2008 -$1.89
Dec2007 $2.71
Dec2006 $2.45
Dec2005 $1.81
Dec2004 $1.66
Dec2003 $2.37
Dec2002 $2.50
Dec2001 $2.55
Dec2000 $2.79
Dec1999 $2.46
Dec1998 $1.87

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.03
Dec2017 $1.66
Dec2016 $2.73
Dec2015 $2.96
Dec2014 $3.45
Dec2013 $4.07
Dec2012 $3.58
Dec2011 $3.24
Dec2010 $2.72
Dec2009 $1.80
Dec2008 $0.93
Dec2007 $2.30
Dec2006 $2.11
Dec2005 $2.02
Dec2004 $2.21
Dec2003 $2.50
Dec2002 $2.52

Recommended Reading:

Other ModernGraham posts about the company

Eli Lilly and Co. Valuation – March 2018 $LLY
Eli Lilly and Company Valuation – July 2016 $LLY
47 Companies in the Spotlight This Week – 5/16/15
Eli Lilly & Co. Annual Valuation – 2015 $LLY
58 Companies in the Spotlight This Week – 1/31/15

Other ModernGraham posts about related companies

Zoetis Inc Valuation – January 2019 $ZTS
Gilead Sciences Inc Valuation – January 2019 $GILD
Pfizer Inc Valuation – November 2018 $PFE
Nektar Therapeutics Valuation – November 2018 $NKTR
Merck & Co Inc Valuation – November 2018 $MRK
Ligand Pharmaceuticals Inc Valuation – September 2018 $LGND
Supernus Pharmaceuticals Inc Valuation – August 2018 $SUPN
Lannett Co Inc Valuation – August 2018 $LCI
Spectrum Pharmaceuticals Inc Valuation – August 2018 $SPPI
Akorn Inc Valuation – July 2018 $AKRX

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Zoetis Inc Valuation – January 2019 $ZTS

Company Profile (excerpt from Reuters): Zoetis Inc., incorporated on July 25, 2012, is engaged in the discovery, development, manufacture and commercialization of animal health medicines and vaccines, with a focus on both livestock and companion animals. The Company has a business, commercializing products across eight core species: cattle, swine, poultry, sheep and fish (collectively, livestock) and dogs, cats and horses (collectively, companion animals), and within five product categories: anti-infectives, vaccines, parasiticides, medicated feed additives and other pharmaceuticals. The Company’s segments include the United States and International. Within each of these operating segments, it offers a product portfolio for both livestock and companion animal customers. As of December 31, 2016, the Company had approximately 300 product lines, including products for both livestock and companion animals across each of its product categories. As of December 31, 2016, the Company marketed its products to veterinarians and livestock producers located in approximately 45 countries across North America, Europe, Africa, Asia, Australia and South America.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ZTS – January 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $41,107,369,275 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.06 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 1571.05% Pass
6. Moderate PEmg Ratio PEmg < 20 43.92 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 19.62 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 4.06 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.10 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.95
MG Growth Estimate 15.00%
MG Value $75.00
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $28.25
MG Value based on 0% Growth $16.56
Market Implied Growth Rate 17.71%
Current Price $85.56
% of Intrinsic Value 114.08%

Zoetis Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $0.88 in 2014 to an estimated $1.95 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 17.71% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Zoetis Inc revealed the company was trading above its Graham Number of $15.55. The company pays a dividend of $0.42 per share, for a yield of 0.5% Its PEmg (price over earnings per share – ModernGraham) was 43.92, which was above the industry average of 35.4. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-8.78.

Zoetis Inc receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$8.78
Graham Number $15.55
PEmg 43.92
Current Ratio 4.06
PB Ratio 19.62
Current Dividend $0.42
Dividend Yield 0.49%
Number of Consecutive Years of Dividend Growth 5

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $4,076,000,000
Total Current Liabilities $1,003,000,000
Long-Term Debt $6,441,000,000
Total Assets $10,459,000,000
Intangible Assets $4,657,000,000
Total Liabilities $8,341,000,000
Shares Outstanding (Diluted Average) 485,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.95
Dec2017 $1.75
Dec2016 $1.65
Dec2015 $0.68
Dec2014 $1.16
Dec2013 $1.01
Dec2012 $0.87
Dec2011 $0.38

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.95
Dec2017 $1.38
Dec2016 $1.16
Dec2015 $0.88
Dec2014 $0.88
Dec2013 $0.64
Dec2012 $0.39
Dec2011 $0.13

Recommended Reading:

Other ModernGraham posts about the company

Zoetis Inc Valuation – March 2018 $ZTS
Zoetis Inc Valuation – June 2016 $ZTS
Zoetis Inc. Valuation – October 2015 Update $ZTS
The Best Companies of the Pharmaceuticals Industry – August 2015
The 16 Best Stocks For Value Investors This Week – 8/1/15

Other ModernGraham posts about related companies

Pfizer Inc Valuation – November 2018 $PFE
Nektar Therapeutics Valuation – November 2018 $NKTR
Merck & Co Inc Valuation – November 2018 $MRK
Ligand Pharmaceuticals Inc Valuation – September 2018 $LGND
Supernus Pharmaceuticals Inc Valuation – August 2018 $SUPN
Lannett Co Inc Valuation – August 2018 $LCI
Spectrum Pharmaceuticals Inc Valuation – August 2018 $SPPI
Akorn Inc Valuation – July 2018 $AKRX
Mallinckrodt PLC Valuation – July 2018 $MNK
Bristol-Myers Squibb Company Valuation – June 2018 $BMY

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Gilead Sciences Inc Valuation – January 2019 $GILD

Company Profile (excerpt from Reuters): Gilead Sciences, Inc., incorporated on June 22, 1987, is a research-based biopharmaceutical company that discovers, develops and commercializes medicines in areas of unmet medical need. The Company’s portfolio of products and pipeline of investigational drugs includes treatments for Human Immunodeficiency Virus/Acquired Immune Deficiency Syndrome (HIV/AIDS), liver diseases, cancer, inflammatory and respiratory diseases and cardiovascular conditions. Its products include AmBisome, Atripla, Cayston, Complera/Eviplera, Descovy, Emtriva, Epclusa, Genvoya, Harvoni, Hepsera, Letairis, Odefsey, Ranexa, Sovaldi, Stribild, Truvada, Tybost, Vemlidy, Viread, Vitekta and Zydelig. The Company’s areas of focus include HIV; liver diseases, such as chronic hepatitis C virus (HCV) infection and chronic hepatitis B virus (HBV) infection; hematology/oncology; cardiovascular, and inflammation/respiratory diseases. The Company had operations in more than 30 countries, as of December 31, 2016. The Company, through its subsidiary Kite Pharma, Inc. (Kite), is engaged in the development of cancer immunotherapies. Kite is focused on chimeric antigen receptor (CAR) and T cell receptor (TCR) engineered cell therapies designed to empower the immune system’s ability to recognize and kill tumors. Kite’s pipeline includes axicabtagene ciloleucel, KTE-C19, Human anti-CD19 (2nd Gen), Humanized anti-CD19 Control CAR (3rd Gen), KITE-585 (anti-BCMA), KITE-796 (anti-CLL-1 Control CAR), MAGE A3/A6, KITE-718 (MAGE A3/A6), MAGE A3, HPV-16 E6 & E7, KITE-439 (HPV-16 E7), KRAS, SSX-2 and Neoantigens.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of GILD – January 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $87,772,115,026 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.45 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 293.60% Pass
6. Moderate PEmg Ratio PEmg < 20 9.88 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.85 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 3.45 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.99 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $6.87
MG Growth Estimate 13.56%
MG Value $244.68
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $99.60
MG Value based on 0% Growth $58.38
Market Implied Growth Rate 0.69%
Current Price $67.84
% of Intrinsic Value 27.73%

Gilead Sciences, Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the poor dividend history. The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $3.61 in 2014 to an estimated $6.87 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.69% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Gilead Sciences, Inc. revealed the company was trading above its Graham Number of $44.37. The company pays a dividend of $2.08 per share, for a yield of 3.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 9.88, which was below the industry average of 35.4, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-4.88.

Gilead Sciences, Inc. performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$4.88
Graham Number $44.37
PEmg 9.88
Current Ratio 3.45
PB Ratio 3.85
Current Dividend $2.08
Dividend Yield 3.07%
Number of Consecutive Years of Dividend Growth 3

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $34,918,000,000
Total Current Liabilities $10,116,000,000
Long-Term Debt $24,570,000,000
Total Assets $64,305,000,000
Intangible Assets $20,432,000,000
Total Liabilities $41,298,000,000
Shares Outstanding (Diluted Average) 1,307,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.60
Dec2017 $3.51
Dec2016 $9.94
Dec2015 $11.91
Dec2014 $7.35
Dec2013 $1.81
Dec2012 $1.64
Dec2011 $1.77
Dec2010 $1.66
Dec2009 $1.41
Dec2008 $1.03
Dec2007 $0.84
Dec2006 -$0.65
Dec2005 $0.43
Dec2004 $0.25
Dec2003 -$0.05
Dec2002 $0.04
Dec2001 $0.03
Dec2000 -$0.04
Dec1999 -$0.05
Dec1998 -$0.03

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.87
Dec2017 $7.30
Dec2016 $8.31
Dec2015 $6.63
Dec2014 $3.61
Dec2013 $1.71
Dec2012 $1.61
Dec2011 $1.51
Dec2010 $1.20
Dec2009 $0.85
Dec2008 $0.51
Dec2007 $0.22
Dec2006 -$0.06
Dec2005 $0.21
Dec2004 $0.08
Dec2003 -$0.01
Dec2002 $0.01

Recommended Reading:

Other ModernGraham posts about the company

Most Undervalued Stocks of the S&P 500 – August 2018
10 Undervalued Stocks for the Enterprising Investor – August 2018
10 Undervalued Stocks for the Enterprising Investor – July 2018
10 Best Dividend Paying Stocks for the Enterprising Investor – May 2018
10 Stocks for Using A Benjamin Graham Value Investing Strategy – May 2018

Other ModernGraham posts about related companies

Pfizer Inc Valuation – November 2018 $PFE
Nektar Therapeutics Valuation – November 2018 $NKTR
Merck & Co Inc Valuation – November 2018 $MRK
Ligand Pharmaceuticals Inc Valuation – September 2018 $LGND
Supernus Pharmaceuticals Inc Valuation – August 2018 $SUPN
Lannett Co Inc Valuation – August 2018 $LCI
Spectrum Pharmaceuticals Inc Valuation – August 2018 $SPPI
Akorn Inc Valuation – July 2018 $AKRX
Mallinckrodt PLC Valuation – July 2018 $MNK
Bristol-Myers Squibb Company Valuation – June 2018 $BMY

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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