Pharmaceuticals Stocks

Celgene Corp Valuation – March 2019 #CELG

Company Profile (excerpt from Reuters): Celgene Corporation, incorporated on April 17, 1986, is an integrated global biopharmaceutical company. The Company, together with its subsidiaries, is engaged in the discovery, development and commercialization of therapies for the treatment of cancer and inflammatory diseases through solutions in protein homeostasis, immuno-oncology, epigenetics, immunology and neuro-inflammation. The Company’s commercial-stage products include REVLIMID (lenalidomide), POMALYST/IMNOVID (pomalidomide), OTEZLA (apremilast), ABRAXANE (paclitaxel albumin-bound particles for injectable suspension), VIDAZA, azacitidine for injection (generic version of VIDAZA) and THALOMID (thalidomide). Its clinical trial activity includes trials across the disease areas of hematology, solid tumors, and inflammation and immunology. The Company also markets ISTODAX, which is an epigenetic modifier.

CELG Chart

CELG data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CELG – 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 $61,820,626,782 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.23 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 391.91% Pass
6. Moderate PEmg Ratio PEmg < 20 14.21 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 10.20 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 2.23 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 3.95 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 $6.19
MG Growth Estimate 15.00%
MG Value $238.39
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $89.78
MG Value based on 0% Growth $52.63
Market Implied Growth Rate 2.86%
Current Price $88.00
% of Intrinsic Value 36.91%

Celgene Corporation 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 $1.94 in 2015 to an estimated $6.19 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.86% 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 above the price.

At the time of valuation, further research into Celgene Corporation revealed the company was trading above its Graham Number of $45.81. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 14.21, 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 $-28.36.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$28.36
Graham Number $45.81
PEmg 14.21
Current Ratio 2.23
PB Ratio 10.20
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 $9,067,000,000
Total Current Liabilities $4,057,000,000
Long-Term Debt $19,769,000,000
Total Assets $35,480,000,000
Intangible Assets $24,216,000,000
Total Liabilities $29,319,000,000
Shares Outstanding (Diluted Average) 714,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $10.60
Dec2018 $5.51
Dec2017 $3.64
Dec2016 $2.49
Dec2015 $1.94
Dec2014 $2.39
Dec2013 $1.68
Dec2012 $1.65
Dec2011 $1.43
Dec2010 $0.94
Dec2009 $0.83
Dec2008 -$1.73
Dec2007 $0.27
Dec2006 $0.09
Dec2005 $0.09
Dec2004 $0.08
Dec2003 $0.04
Dec2002 -$0.15
Dec2001 $0.00
Dec2000 -$0.03
Dec1999 -$0.05

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.19
Dec2018 $3.72
Dec2017 $2.70
Dec2016 $2.16
Dec2015 $1.94
Dec2014 $1.83
Dec2013 $1.47
Dec2012 $1.11
Dec2011 $0.68
Dec2010 $0.23
Dec2009 -$0.11
Dec2008 -$0.47
Dec2007 $0.14
Dec2006 $0.06
Dec2005 $0.04
Dec2004 $0.00
Dec2003 -$0.03

Recommended Reading:

Other ModernGraham posts about the company

Celgene Corp Valuation – June 2018 $CELG
Celgene Corporation Valuation – March 2017 $CELG
Celgene Corp Valuation – December 2015 Update $CELG
Celgene Corporation Analysis – September 2015 Update $CELG
Celgene Corporation Stock Analysis – May 2015 Quarterly Update

Other ModernGraham posts about related companies

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
Eli Lilly and Co Valuation – January 2019 $LLY
Zoetis Inc Valuation – January 2019 $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.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Back To Top