Biogen Inc Valuation – March 2019 #BIIB

Company Profile (excerpt from Reuters): Biogen Inc., incorporated on April 1, 1997, is a biopharmaceutical company. The Company focuses on discovering, developing, manufacturing and delivering therapies to people living with serious neurological, rare and autoimmune diseases. The Company markets products, including TECFIDERA, AVONEX, PLEGRIDY, TYSABRI, ZINBRYTA and FAMPYRA for multiple sclerosis (MS), FUMADERM for the treatment of severe plaque psoriasis and SPINRAZA for the treatment of spinal muscular atrophy (SMA). The Company also has a collaboration agreement with Genentech, Inc. (Genentech), a member of the Roche Group, with respect to RITUXAN for the treatment of non-Hodgkin’s lymphoma, chronic lymphocytic leukemia (CLL) and other conditions, GAZYVA indicated for the treatment of CLL and follicular lymphoma, and other anti-CD20 therapies.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BIIB – March 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 $46,257,034,108 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.32 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 314.38% Pass
6. Moderate PEmg Ratio PEmg < 20 11.41 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.61 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 2.32 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.37 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 $20.61
MG Growth Estimate 12.91%
MG Value $707.38
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $298.87
MG Value based on 0% Growth $175.20
Market Implied Growth Rate 1.45%
Current Price $235.16
% of Intrinsic Value 33.24%

Biogen 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 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 feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $11.08 in 2015 to an estimated $20.61 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.45% 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 Biogen Inc revealed the company was trading above its Graham Number of $202.57. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 11.41, which was below the industry average of 47.6, 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 $-23.06.

Biogen Inc performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$23.06
Graham Number $202.57
PEmg 11.41
Current Ratio 2.32
PB Ratio 3.61
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 $7,640,900,000
Total Current Liabilities $3,295,200,000
Long-Term Debt $5,936,500,000
Total Assets $25,288,900,000
Intangible Assets $8,826,400,000
Total Liabilities $12,257,300,000
Shares Outstanding (Diluted Average) 200,200,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $27.58
Dec2018 $21.58
Dec2017 $11.92
Dec2016 $16.93
Dec2015 $15.34
Dec2014 $12.37
Dec2013 $7.81
Dec2012 $5.76
Dec2011 $5.04
Dec2010 $3.94
Dec2009 $3.35
Dec2008 $2.65
Dec2007 $1.99
Dec2006 $0.63
Dec2005 $0.47
Dec2004 $0.07
Dec2003 -$4.92
Dec2002 $0.85
Dec2001 $1.78
Dec2000 $0.72
Dec1999 $0.47

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $20.61
Dec2018 $16.63
Dec2017 $13.73
Dec2016 $13.63
Dec2015 $11.08
Dec2014 $8.29
Dec2013 $5.90
Dec2012 $4.68
Dec2011 $3.89
Dec2010 $3.04
Dec2009 $2.34
Dec2008 $1.61
Dec2007 $0.61
Dec2006 -$0.25
Dec2005 -$0.58
Dec2004 -$0.83
Dec2003 -$0.93

Recommended Reading:

Other ModernGraham posts about the company

Biogen Inc Valuation – June 2018 $BIIB
Biogen Inc Valuation – July 2017 $BIIB
Biogen Inc Valuation – February 2016 Update $BIIB
13 Best Stocks For Value Investors This Week – 10/17/15
Biogen Inc. Valuation – October 2015 Update $BIIB

Other ModernGraham posts about related companies

Mylan NV Valuation – March 2019 #MYL
Celgene Corp Valuation – March 2019 #CELG
Amgen Inc Valuation – March 2019 #AMGN
AbbVie Inc Valuation – March 2019 #ABBV
Allergan PLC Valuation – February 2019 $AGN
Incyte Corp Valuation – February 2019 $INCY
Regeneron Pharmaceuticals Inc Valuation – February 2019 $REGN
Alexion Pharmaceuticals Inc Valuation – February 2019 $ALXN
Vertex Pharmaceuticals Inc Valuation – February 2019 $VRTX
Perrigo Company Valuation – February 2019 $PRGO

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.

Biogen Inc Valuation – June 2018 $BIIB

Company Profile (excerpt from Reuters): Biogen Inc., incorporated on April 1, 1997, is a biopharmaceutical company. The Company focuses on discovering, developing, manufacturing and delivering therapies to people living with serious neurological, rare and autoimmune diseases. The Company markets products, including TECFIDERA, AVONEX, PLEGRIDY, TYSABRI, ZINBRYTA and FAMPYRA for multiple sclerosis (MS), FUMADERM for the treatment of severe plaque psoriasis and SPINRAZA for the treatment of spinal muscular atrophy (SMA). The Company also has a collaboration agreement with Genentech, Inc. (Genentech), a member of the Roche Group, with respect to RITUXAN for the treatment of non-Hodgkin’s lymphoma, chronic lymphocytic leukemia (CLL) and other conditions, GAZYVA indicated for the treatment of CLL and follicular lymphoma, and other anti-CD20 therapies.

BIIB Chart

BIIB data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BIIB – June 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 $61,384,850,617 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.23 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 319.38% Pass
6. Moderate PEmg Ratio PEmg < 20 17.13 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.41 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 3.23 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.84 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 $17.05
MG Growth Estimate 15.00%
MG Value $656.60
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $247.29
MG Value based on 0% Growth $144.96
Market Implied Growth Rate 4.32%
Current Price $292.19
% of Intrinsic Value 44.50%

Biogen Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PB ratio. 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 Undervalued after growing its EPSmg (normalized earnings) from $8.29 in 2014 to an estimated $17.05 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.32% 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 Biogen Inc revealed the company was trading above its Graham Number of $175.14. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 17.13, which was below the industry average of 37.68, 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 $-8.77.

Biogen Inc performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$8.77
Graham Number $175.14
PEmg 17.13
Current Ratio 3.23
PB Ratio 4.41
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 3/1/2018
Total Current Assets $10,195,400,000
Total Current Liabilities $3,152,100,000
Long-Term Debt $5,929,400,000
Total Assets $26,090,100,000
Intangible Assets $8,702,300,000
Total Liabilities $12,052,600,000
Shares Outstanding (Diluted Average) 211,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $22.86
Dec2017 $11.92
Dec2016 $16.93
Dec2015 $15.34
Dec2014 $12.37
Dec2013 $7.81
Dec2012 $5.76
Dec2011 $5.04
Dec2010 $3.94
Dec2009 $3.35
Dec2008 $2.65
Dec2007 $1.99
Dec2006 $0.63
Dec2005 $0.47
Dec2004 $0.07
Dec2003 -$4.92
Dec2002 $0.85
Dec2001 $1.78
Dec2000 $0.72
Dec1999 $0.47
Dec1998 $0.30

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $17.05
Dec2017 $13.73
Dec2016 $13.63
Dec2015 $11.08
Dec2014 $8.29
Dec2013 $5.90
Dec2012 $4.68
Dec2011 $3.89
Dec2010 $3.04
Dec2009 $2.34
Dec2008 $1.61
Dec2007 $0.61
Dec2006 -$0.25
Dec2005 -$0.58
Dec2004 -$0.83
Dec2003 -$0.93
Dec2002 $0.98

Recommended Reading:

Other ModernGraham posts about the company

Biogen Inc Valuation – July 2017 $BIIB
Biogen Inc Valuation – February 2016 Update $BIIB
13 Best Stocks For Value Investors This Week – 10/17/15
Biogen Inc. Valuation – October 2015 Update $BIIB
The Best Companies of the Pharmaceuticals Industry – August 2015

Other ModernGraham posts about related companies

Mylan NV Valuation – June 2018 $MYL
Amgen Inc Valuation – June 2018 $AMGN
Celgene Corp Valuation – June 2018 $CELG
Allergan PLC Valuation – May 2018 $AGN
Incyte Corp Valuation – April 2018 $INCY
Regeneron Pharmaceuticals Inc Valuation – April 2018 $REGN
Alexion Pharmaceuticals Inc Valuation – April 2018 $ALXN
Vertex Pharmaceuticals Inc Valuation – April 2018 $VRTX
AmerisourceBergen Corp Valuation – April 2018 $ABC
Perrigo Company PLC Valuation – April 2018 $PRGO

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.

Biogen Inc Valuation – July 2017 $BIIB

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 Biogen Inc (BIIB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Biogen Inc. is a biopharmaceutical company. The Company focuses on discovering, developing, manufacturing and delivering therapies to people living with serious neurological, rare and autoimmune diseases. The Company markets products, including TECFIDERA, AVONEX, PLEGRIDY, TYSABRI, ZINBRYTA and FAMPYRA for multiple sclerosis (MS), FUMADERM for the treatment of severe plaque psoriasis and SPINRAZA for the treatment of spinal muscular atrophy (SMA). It also has a collaboration agreement with Genentech, Inc. (Genentech), a member of the Roche Group, with respect to RITUXAN for the treatment of non-Hodgkin’s lymphoma, chronic lymphocytic leukemia (CLL) and other conditions, GAZYVA indicated for the treatment of CLL and follicular lymphoma, and other anti-CD20 therapies. The Company’s product candidate includes OCREVUS; Biosimilar adalimumab; Aducanumab; E2609; BIIB074; BAN2401; Opicinumab; CIRARA; BIIB061; BIIB054; BIIB067, and BIIB068.

BIIB Chart

BIIB data by YCharts

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Downloadable PDF version of this valuation:

ModernGraham Valuation of BIIB – July 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 $60,088,325,615 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.29 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 441.65% Pass
6. Moderate PEmg Ratio PEmg < 20 16.57 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.28 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 2.29 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.54 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 $16.94
MG Growth Estimate 15.00%
MG Value $652.29
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $245.67
MG Value based on 0% Growth $144.01
Market Implied Growth Rate 4.04%
Current Price $280.81
% of Intrinsic Value 43.05%

Biogen 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 PB ratio. 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 Undervalued after growing its EPSmg (normalized earnings) from $5.9 in 2013 to an estimated $16.94 for 2017.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.04% 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 Biogen Inc revealed the company was trading above its Graham Number of $165.2.  The company does not pay a dividend.  Its PEmg (price over earnings per share – ModernGraham) was 16.57, which was below the industry average of 28.67, 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 $-13.23.

Biogen 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) -$13.23
Graham Number $165.20
PEmg 16.57
Current Ratio 2.29
PB Ratio 5.28
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 3/1/2017
Total Current Assets $6,859,700,000
Total Current Liabilities $2,992,500,000
Long-Term Debt $5,952,700,000
Total Assets $21,195,900,000
Intangible Assets $7,715,600,000
Total Liabilities $9,716,900,000
Shares Outstanding (Diluted Average) 215,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $21.57
Dec2016 $16.93
Dec2015 $15.34
Dec2014 $12.37
Dec2013 $7.81
Dec2012 $5.76
Dec2011 $5.04
Dec2010 $3.94
Dec2009 $3.35
Dec2008 $2.65
Dec2007 $1.99
Dec2006 $0.63
Dec2005 $0.47
Dec2004 $0.07
Dec2003 -$4.92
Dec2002 $0.85
Dec2001 $1.78
Dec2000 $0.72
Dec1999 $0.47
Dec1998 $0.30
Dec1997 $0.20

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $16.94
Dec2016 $13.63
Dec2015 $11.08
Dec2014 $8.29
Dec2013 $5.90
Dec2012 $4.68
Dec2011 $3.89
Dec2010 $3.04
Dec2009 $2.34
Dec2008 $1.61
Dec2007 $0.61
Dec2006 -$0.25
Dec2005 -$0.58
Dec2004 -$0.83
Dec2003 -$0.93
Dec2002 $0.98
Dec2001 $0.93

Recommended Reading:

Other ModernGraham posts about the company

Biogen Inc Valuation – February 2016 Update $BIIB
13 Best Stocks For Value Investors This Week – 10/17/15
Biogen Inc. Valuation – October 2015 Update $BIIB
The Best Companies of the Pharmaceuticals Industry – August 2015
The 20 Best Stocks For Value Investors This Week – 7/25/15

Other ModernGraham posts about related companies

Mylan NV Valuation – March 2017 $MYL
Amgen Inc Valuation – March 2017 $AMGN
Celgene Corporation Valuation – March 2017 $CELG
Ligand Pharmaceuticals Inc Valuation – Initial Coverage $LGND
Pfizer Inc Valuation – March 2017 $PFE
Supernus Pharmaceuticals Inc Valuation – Initial Coverage $SUPN
Lannett Company Inc Valuation – Initial Coverage $LCI
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Abbott Laboratories Valuation – January 2017 $ABT
Johnson & Johnson Valuation – January 2017 $JNJ

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.

Biogen Inc Valuation – February 2016 Update $BIIB

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 Most Undervalued Companies for the Defensive Investor - November 2015.  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 Biogen Inc (BIIB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Biogen Inc., formerly Biogen Idec Inc., is a global biopharmaceutical company. The Company is focused on discovering, developing, manufacturing and delivering therapies for neurological, autoimmune and hematologic disorders. The Company develops, manufactures and markets products designed for the treatment of multiple sclerosis (MS) and hemophilia A and B. The Company’s marketed products include AVONEX, PLEGRIDY, TECFIDERA, TYSABRI, FAMPYRA for multiple sclerosis (MS), ALPROLIX for hemophilia B, and ELOCTATE for hemophilia A, among others. It also collaborates on the development and commercialization of RITUXAN (rituximab), which is a monoclonal antibody for the treatment of non-Hodgkin’s lymphoma, chronic lymphocytic leukemia and other conditions and share profits and losses for GAZYVA, which is for the treatment of chronic lymphocytic leukemia.

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To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

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. Here is a free sample valuation pdf, and 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 BIIB – February 2016

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 $60,656,649,007 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.60 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 456.67% Pass
6. Moderate PEmg Ratio PEmg < 20 19.68 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.35 Fail
Score
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 2.60 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.58 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 $13.58
MG Growth Estimate 15.00%
MG Value $522.89
Opinion Undervalued
MG Value based on 3% Growth $196.93
MG Value based on 0% Growth $115.44
Market Implied Growth Rate 5.59%
Current Price $267.23
% of Intrinsic Value 51.11%

Biogen Inc does not qualify for either the Enterprising Investor or the more conservative Defensive Investor.  The Defensive Investor is concerned with the lack of dividends along with the high PB ratio.  The Enterprising Investor is concerned by the level of debt relative to the net current assets along with the lack of dividends.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities at this time or proceed with a cautious speculative attitude.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $4.68 in 2012 to an estimated $13.58 for 2016.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.59% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Biogen Inc (BIIB)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

BIIB Charts February 2016

Net Current Asset Value (NCAV) -$15.39
Graham Number $126.09
PEmg 19.68
Current Ratio 2.60
PB Ratio 6.35
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

 

[/not-level-free]

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 Dec2015
Total Current Assets $6,700,300,000
Total Current Liabilities $2,577,700,000
Long-Term Debt $6,521,500,000
Total Assets $19,504,800,000
Intangible Assets $6,748,900,000
Total Liabilities $10,129,900,000
Shares Outstanding (Diluted Average) 222,900,000

Earnings Per Share History

Next Fiscal Year Estimate $16.80
Dec2015 $15.31
Dec2014 $12.37
Dec2013 $7.81
Dec2012 $5.76
Dec2011 $5.04
Dec2010 $3.94
Dec2009 $3.35
Dec2008 $2.65
Dec2007 $1.99
Dec2006 $0.63
Dec2005 $0.47
Dec2004 $0.07
Dec2003 -$4.92
Dec2002 $0.85
Dec2001 $1.78
Dec2000 $2.16
Dec1999 $0.47
Dec1998 $0.30
Dec1997 $0.20
Dec1996 $0.09

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $13.58
Dec2015 $11.07
Dec2014 $8.29
Dec2013 $5.90
Dec2012 $4.68
Dec2011 $3.89
Dec2010 $3.04
Dec2009 $2.34
Dec2008 $1.61
Dec2007 $0.61
Dec2006 -$0.25
Dec2005 -$0.58
Dec2004 -$0.74
Dec2003 -$0.74
Dec2002 $1.27
Dec2001 $1.32
Dec2000 $0.94

Recommended Reading:

Other ModernGraham posts about the company

13 Best Stocks For Value Investors This Week – 10/17/15
The Best Companies of the Pharmaceuticals Industry – August 2015
The 20 Best Stocks For Value Investors This Week – 7/25/15
Biogen IDEC Inc. Analysis – July 2015 Update $BIIB
Biogen IDEC Quarterly Valuation – April 2015 $BIIB

 

Other ModernGraham posts about related companies

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Celgene Corp Valuation – December 2015 Update $CELG
Merck & Co Valuation – November 2015 Update $MRK
Zoetis Inc. Valuation – October 2015 Update $ZTS
Biogen Inc. Valuation – October 2015 Update $BIIB
Perrigo Company PLC Analysis – October 2015 Update $PRGO
Amgen Inc. Analysis – September 2015 Update $AMGN
Pfizer Inc Analysis – September 2015 Update $PFE

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.

Biogen Inc. Valuation – October 2015 Update $BIIB

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 Most Undervalued Companies for the Defensive Investor – September 2015.  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 Biogen Inc. (BIIB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Biogen Inc., formerly Biogen Idec Inc., is a global biopharmaceutical company. The Company is focused on discovering, developing, manufacturing and delivering therapies for neurological, autoimmune and hematologic disorders. The Company develops, manufactures and markets products designed for the treatment of multiple sclerosis (MS) and hemophilia A and B. The Company’s marketed products include AVONEX, PLEGRIDY, TECFIDERA, TYSABRI, FAMPYRA for multiple sclerosis (MS), ALPROLIX for hemophilia B, and ELOCTATE for hemophilia A, among others. It also collaborates on the development and commercialization of RITUXAN (rituximab), which is a monoclonal antibody for the treatment of non-Hodgkin’s lymphoma, chronic lymphocytic leukemia and other conditions and share profits and losses for GAZYVA, which is for the treatment of chronic lymphocytic leukemia.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of BIIB – October 2015

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 $61,443,546,534 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.20 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 558.25% Pass
6. Moderate PEmg Ratio PEmg < 20 24.22 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.91 Fail
Score
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 2.20 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.19 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

BIIB value Chart October 2015

EPSmg $10.80
MG Growth Estimate 15.00%
MG Value $415.85
Opinion Undervalued
MG Value based on 3% Growth $156.62
MG Value based on 0% Growth $91.81
Market Implied Growth Rate 7.86%
Current Price $261.64
% of Intrinsic Value 62.92%

Biogen Inc. qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the lack of dividends and the high PEmg and PB ratios.  The Enterprising Investor is only initially concerned by the lack of dividends.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $3.89 in 2011 to an estimated $10.80 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.86% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Biogen Inc. (BIIB)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

BIIB Charts October 2015

Net Current Asset Value (NCAV) $6.08
Graham Number $132.11
PEmg 24.22
Current Ratio 2.20
PB Ratio 4.91
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

 

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

Most Recent Balance Sheet Figures

Total Current Assets $5,618,985,000
Total Current Liabilities $2,555,832,000
Long-Term Debt $576,207,000
Total Assets $16,759,170,000
Intangible Assets $6,449,132,000
Total Liabilities $4,186,594,000
Shares Outstanding (Diluted Average) 235,718,000

Earnings Per Share History

Next Fiscal Year Estimate $14.51
Dec14 $12.37
Dec13 $7.81
Dec12 $5.76
Dec11 $5.04
Dec10 $3.94
Dec09 $3.35
Dec08 $2.65
Dec07 $1.99
Dec06 $0.63
Dec05 $0.47
Dec04 $0.07
Dec03 -$4.92
Dec02 $0.85
Dec01 $1.78
Dec00 $2.16
Dec99 $0.47
Dec98 $0.30
Dec97 $0.20
Dec96 $0.09
Dec95 $0.03

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $10.80
Dec14 $8.29
Dec13 $5.90
Dec12 $4.68
Dec11 $3.89
Dec10 $3.04
Dec09 $2.34
Dec08 $1.61
Dec07 $0.61
Dec06 -$0.25
Dec05 -$0.58
Dec04 -$0.74
Dec03 -$0.74
Dec02 $1.27
Dec01 $1.32
Dec00 $0.94
Dec99 $0.29

Recommended Reading:

Other ModernGraham posts about the company

The Best Companies of the Pharmaceuticals Industry – August 2015
The 20 Best Stocks For Value Investors This Week – 7/25/15
Biogen IDEC Inc. Analysis – July 2015 Update $BIIB
Biogen IDEC Quarterly Valuation – April 2015 $BIIB
Biogen Idec Inc. Quarterly Valuation – January 2015 $BIIB

Other ModernGraham posts about related companies

Perrigo Company PLC Analysis – October 2015 Update $PRGO
Amgen Inc. Analysis – September 2015 Update $AMGN
Pfizer Inc Analysis – September 2015 Update $PFE
Johnson & Johnson Analysis – September 2015 Update $JNJ
Celgene Corporation Analysis – September 2015 Update $CELG
Allergan PLC Analysis – August 2015 Update $AGN
The Best Companies of the Pharmaceuticals Industry – August 2015
Alexion Pharmaceuticals Inc. Analysis – August 2015 Update $ALXN
Akorn Inc. Analysis – Initial Coverage $AKRX
Zoetis Inc. Analysis – July 2015 Update $ZTS

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.

Biogen IDEC Inc. Analysis – July 2015 Update $BIIB

BI_logo_biogenidecBenjamin 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 5 Most Undervalued Companies for the Defensive Investor – July 2015.  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 Biogen IDEC Inc. (BIIB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Biogen Inc., formerly Biogen Idec Inc., is a global biopharmaceutical company. The Company is focused on discovering, developing, manufacturing and delivering therapies for neurological, autoimmune and hematologic disorders. The Company develops, manufactures and markets products designed for the treatment of multiple sclerosis (MS) and hemophilia A and B. The Company’s marketed products include AVONEX, PLEGRIDY, TECFIDERA, TYSABRI, FAMPYRA for multiple sclerosis (MS), ALPROLIX for hemophilia B, and ELOCTATE for hemophilia A, among others. It also collaborates on the development and commercialization of RITUXAN (rituximab), which is a monoclonal antibody for the treatment of non-Hodgkin’s lymphoma, chronic lymphocytic leukemia and other conditions and share profits and losses for GAZYVA, which is for the treatment of chronic lymphocytic leukemia.

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Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion - PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 - PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years - PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years - FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period - PASS
  6. Moderate PEmg ratio – PEmg is less than 20 - FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 - FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 - PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 - PASS
  3. Earnings Stability – positive earnings per share for at least 5 years - PASS
  4. Dividend Record – currently pays a dividend - FAIL
  5. Earnings growth – EPSmg greater than 5 years ago - PASS

Valuation Summary

Key Data:

Recent Price $395.03
MG Value $437.54
MG Opinion Fairly Valued
Value Based on 3% Growth $164.79
Value Based on 0% Growth $96.60
Market Implied Growth Rate 13.13%
Net Current Asset Value (NCAV) $7.24
PEmg 34.76
Current Ratio 2.70
PB Ratio 7.98

Balance Sheet – March 2015

Current Assets $5,259,000,000
Current Liabilities $1,946,000,000
Total Debt $581,000,000
Total Assets $15,219,000,000
Intangible Assets $6,203,000,000
Total Liabilities $3,553,000,000
Outstanding Shares 235,600,000

Earnings Per Share

2015 (estimate) $16.20
2014 $12.37
2013 $7.81
2012 $5.76
2011 $5.04
2010 $3.94
2009 $3.35
2008 $2.65
2007 $1.99
2006 $0.63
2005 $0.47

Earnings Per Share – ModernGraham

2015 (estimate) $11.36
2014 $8.29
2013 $5.90
2012 $4.68
2011 $3.89
2010 $3.04

Dividend History
Biogen IDEC does not pay a dividend.

Free Cash Flow

Conclusion:

Biogen IDEC Inc. qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the lack of dividends, along with the high PEmg and PB ratios.  The Enterprising Investor is only initially concerned by the lack of dividends.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the evaluation.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $3.89 in 2011 to an estimated $11.36 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 13.13% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Biogen IDEC Inc. (BIIB)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

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.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

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Biogen IDEC Quarterly Valuation – April 2015 $BIIB

BI_logo_biogenidecBiogen Idec Inc. (BIIB) may initially attract many value investors due to the strong earnings growth over the last several years. However, Benjamin Graham, the father of value investing, taught that looking at the price cannot be the sole factor in investment decisions, as the most important aspect to consider is whether the company is trading at a discount relative to its intrinsic value. It is through a thorough fundamental analysis that the investor is able to make a determination about a potential investment’s merits. Here is an updated look at how the company fares in the ModernGraham valuation model.

The model is inspired by the teachings of Benjamin Graham, and considers numerous metrics intended to help the investor reduce risk levels. The first part of the analysis is to determine whether the company is suitable for the very conservative Defensive Investor, or the less conservative Enterprising Investor who is willing to spend a greater amount of time conducting further research.

In addition, Graham strongly suggested that investors avoid speculation in order to remove the subjective elements of emotion. This is best achieved by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another. By using the ModernGraham method, one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.

BIIB Chart

BIIB data by YCharts

Defensive Investor – Must pass at least 6 of the following 7 tests: Score = 4/7

  1. Adequate Size of Enterprise – Market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – Current ratio greater than 2 – PASS
  3. Earnings Stability – Positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – Has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – Earnings per share has increased by at least one-third over the last 10 years, using three-year averages at the beginning and end of the period – PASS
  6. Moderate PEmg (price over normalized earnings) ratio – PEmg is less than 20 – FAIL
  7. Moderate Price-to-Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – Must pass at least 4 of the following 5 tests, or be suitable for a Defensive Investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – Current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt-to-Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – Positive earnings per share for at least 5 years – PASS
  4. Dividend Record – Currently pays a dividend – FAIL
  5. Earnings Growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data

Recent Price $413.32
MG Value $319.27
MG Opinion Overvalued
Value Based on 3% Growth $120.24
Value Based on 0% Growth $70.49
Market Implied Growth Rate 20.67%
Net Current Asset Value (NCAV) $4.93
PEmg 49.84
Current Ratio 2.10
PB Ratio 9.04

Balance Sheet – December 2014

Current Assets $4,673,000,000
Current Liabilities $2,220,000,000
Total Debt $582,000,000
Total Assets $14,317,000,000
Intangible Assets $5,789,000,000
Total Liabilities $3,508,000,000
Outstanding Shares 236,400,000

Earnings Per Share

2014 $12.37
2013 $7.81
2012 $5.76
2011 $5.04
2010 $3.94
2009 $3.35
2008 $2.65
2007 $1.99
2006 $0.63
2005 $0.47
2004 $0.07

Earnings Per Share – ModernGraham

2014 $8.29
2013 $5.90
2012 $4.68
2011 $3.89
2010 $3.04
2009 $2.34

Dividend History

Biogen does not pay a dividend.

Conclusion

Biogen is suitable for the Enterprising Investor, but not for the more conservative Defensive Investor, who is concerned about the lack of dividends, and the high PEmg and PB ratios. The Enterprising Investor, on the other hand, is only concerned initially by the lack of dividend payments. As a result, all Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to valuation, it is critical to consider the company’s earnings history. In this case, Biogen has grown its EPSmg (normalized earnings) from $3.04 in 2010 to $8.29 for 2014. While this level of demonstrated growth is very impressive, it does not support the market’s implied estimate for earnings growth of 20.67% over the next 7-10 years because such a high rate of growth is generally not sustainable over a long period of time. Historically, the company’s annual growth has averaged around 34.5%, but the ModernGraham valuation model caps growth estimates at a more conservative 15%. Therefore, the model returns an estimate of intrinsic value falling below the current price, indicating the company is overvalued at the present time.

Biogen Idec Inc. Quarterly Valuation – January 2015 $BIIB

BI_logo_biogenidec

Biogen Idec should satisfy the Enterprising Investor, but not the Defensive Investor. The Defensive Investor is concerned with the lack of dividends along with the high PEmg and PB ratios, while the Enterprising Investor’s only concern is the lack of dividends. Therefore, Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

From a valuation side of things, the company has grown its EPSmg (normalized earnings) from $3.04 in 2010 to an estimated $8.66 for 2014. This is a very strong and impressive level of demonstrated growth, which is in line with the market’s implied estimate for earnings growth of 15.08% over the next 7-10 years. In fact, actual historical growth is about 36.87% per year, so the market has priced in a significant earnings drop to a more sustainable level over the long term. The ModernGraham valuation model, therefore, returns an estimate of intrinsic value falling within a margin of safety relative to the current price, indicating the company is fairly valued at the present time.

Be sure to check out previous ModernGraham valuations of Biogen Idec Inc. (BIIB) for greater perspective!

Read the full valuation on Seeking Alpha!

BIIB Chart

BIIB data by YCharts

Disclaimer:  The author did not hold a position in Biogen Idec Inc. (BIIB) at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Biogen Idec Inc. Quarterly Stock Valuation – October 2014 $BIIB

BI_logo_biogenidecBenjamin 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 5 Highest Dividend Yields Among Undervalued Companies for the Defensive Investor – September 2014.  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 specific look at how Biogen Idec (BIIB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Biogen Idec Inc. (Biogen Idec) is a global biotechnology company. The Company discovers, develops, manufactures and markets therapies for the treatment of neurodegenerative diseases, hemophilia and autoimmune disorders. The Company’s products include AVONEX, TYSABRI, FAMPYRA, FUMADERM and RITUXAN. In September 2011, the Company acquired from the Dompe Group the noncontrolling interests in its joint venture sales affiliates in Italy and Switzerland. In April 2013, Elan Corporation, plc closed the TYSABRI (natalizumab) Collaboration Transaction with Biogen Idec.
BIIB Chart

BIIB data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion - PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 - PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years - PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years - FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period - PASS
  6. Moderate PEmg ratio – PEmg is less than 20 - FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 - FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 - PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 - PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend - FAIL
  5. Earnings growth – EPSmg greater than 5 years ago - PASS

Valuation Summary

Key Data:

Recent Price $327.09
MG Value $315.03
MG Opinion Fairly Valued
Value Based on 3% Growth $118.65
Value Based on 0% Growth $69.55
Market Implied Growth Rate 15.74%
Net Current Asset Value (NCAV) $2.40
PEmg 39.97
Current Ratio 2.05
PB Ratio 8.08

Balance Sheet – 6/30/2014

Current Assets $3,925,000,000
Current Liabilities $1,916,600,000
Total Debt $586,100,000
Total Assets $12,918,000,000
Intangible Assets $5,614,200,000
Total Liabilities $3,356,700,000
Outstanding Shares 236,300,000

Earnings Per Share

2014 (estimate) $12.04
2013 $7.81
2012 $5.76
2011 $5.04
2010 $3.94
2009 $3.35
2008 $2.65
2007 $1.99
2006 $0.62
2005 $0.46
2004 $0.07

Earnings Per Share – ModernGraham

2014 (estimate) $8.18
2013 $5.90
2012 $4.68
2011 $3.89
2010 $3.04
2009 $2.33

Dividend History

Biogen Idec does not pay a dividend.

Conclusion:

Biogen Idec qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor has concerns regarding the lack of dividend payments and the high PEmg and PB ratios.  The Enterprising Investor’s only initial concern is the lack of dividend payments.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with research into the company and comparing it to other opportunities. From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $3.04 in 2010 to an estimated $8.18 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 15.74% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value within a margin of safety relative to the price.

Be sure to check out the previous ModernGraham valuations of Biogen Idec (BIIB) for more perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Biogen Idec (BIIB)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Biogen Idec (BIIB) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Biogen IDEC Inc. Quarterly Valuation – July 2014 $BIIB

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 5 Highest Dividend Yields Among Undervalued Companies for the Enterprising Investor.  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 specific look at how Biogen IDEC Inc. (BIIB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Biogen Idec Inc. (Biogen Idec) is a global biotechnology company. The Company discovers, develops, manufactures and markets therapies for the treatment of neurodegenerative diseases, hemophilia and autoimmune disorders. The Company’s products include AVONEX, TYSABRI, FAMPYRA, FUMADERM and RITUXAN. In September 2011, the Company acquired from the Dompe Group the noncontrolling interests in its joint venture sales affiliates in Italy and Switzerland. In April 2013, Elan Corporation, plc closed the TYSABRI (natalizumab) Collaboration Transaction with Biogen Idec. BIIB Chart

BIIB data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 - PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years - PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years - FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period - PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend - FAIL
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $330.50
MG Value $300.02
MG Opinion Overvalued
Value Based on 3% Growth $112.99
Value Based on 0% Growth $66.24
Market Implied Growth Rate 16.96%
Net Current Asset Value (NCAV) $1.83
PEmg 42.41
Current Ratio 2.21
PB Ratio 8.55

Balance Sheet – 3/31/2014

Current Assets $3,525,000,000
Current Liabilities $1,594,200,000
Total Debt $591,000,000
Total Assets $12,230,100,000
Intangible Assets $5,597,300,000
Total Liabilities $3,093,400,000
Outstanding Shares 236,330,000

Earnings Per Share

2014 (estimate) $10.87
2013 $7.81
2012 $5.76
2011 $5.04
2010 $3.94
2009 $3.35
2008 $2.65
2007 $1.99
2006 $0.62
2005 $0.46
2004 $0.07

Earnings Per Share – ModernGraham

2014 (estimate) $7.79
2013 $5.90
2012 $4.68
2011 $3.89
2010 $3.04
2009 $2.33

Conclusion:

Biogen qualifies for the Enterprising Investor but not the Defensive Investor. The Defensive Investor has concerns with the short dividend record and the high PEmg and PB ratios, while the Enterprising Investor’s only concern is the lack of dividend payments. As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities such as through a review of ModernGraham’s valuation of Abbvie (ABBV) and ModernGraham’s valuation of Pfizer Inc. (PFE). This level of demonstrated growth does not support the market’s implied estimate of 16.96% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Biogen IDEC Inc. (BIIB)? Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Biogen IDEC Inc. (BIIB) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

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