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.

Celgene Corp Valuation – June 2018 $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 – 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 $57,116,379,898 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.53 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 353.83% Pass
6. Moderate PEmg Ratio PEmg < 20 16.85 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 11.71 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 2.53 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.26 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 $4.68
MG Growth Estimate 15.00%
MG Value $180.05
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $67.81
MG Value based on 0% Growth $39.75
Market Implied Growth Rate 4.17%
Current Price $78.80
% of Intrinsic Value 43.77%

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 $1.83 in 2014 to an estimated $4.68 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.17% 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 $41.43. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 16.85, 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 $-28.

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) -$28.00
Graham Number $41.43
PEmg 16.85
Current Ratio 2.53
PB Ratio 11.71
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 $7,872,000,000
Total Current Liabilities $3,115,000,000
Long-Term Debt $20,271,000,000
Total Assets $34,556,000,000
Intangible Assets $24,617,000,000
Total Liabilities $29,384,000,000
Shares Outstanding (Diluted Average) 768,300,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $8.37
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
Dec1998 -$0.06

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.68
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
Dec2002 -$0.07

Recommended Reading:

Other ModernGraham posts about the company

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
28 Companies in the Spotlight This Week – 2/28/15

Other ModernGraham posts about related companies

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
AbbVie Inc Valuation – April 2018 $ABBV
Eli Lilly and Co. Valuation – March 2018 $LLY
Zoetis Inc Valuation – March 2018 $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.

Celgene Corporation Valuation – March 2017 $CELG

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 Celgene Corp (CELG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Celgene Corporation 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. Its 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. The Company is also evaluating AG-221 (enasidenib) in combination with VIDAZA in newly diagnosed acute myeloid leukemia with isocitrate dehydrogenase-2 mutations.

CELG Chart

CELG data by YCharts

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Downloadable PDF version of this valuation:

ModernGraham Valuation of CELG – 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 $97,844,834,661 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.67 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 28775.00% Pass
6. Moderate PEmg Ratio PEmg < 20 32.62 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 15.31 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 3.67 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.74 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 $3.86
MG Growth Estimate 15.00%
MG Value $148.46
Opinion Fairly Valued
MG Grade D
MG Value based on 3% Growth $55.91
MG Value based on 0% Growth $32.78
Market Implied Growth Rate 12.06%
Current Price $125.77
% of Intrinsic Value 84.72%

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 insufficient earnings stability 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 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 $1.47 in 2013 to an estimated $3.86 for 2017. This level of demonstrated earnings growth supports the market’s implied estimate of 12.06% 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 Celgene Corporation revealed the company was trading above its Graham Number of $36.93. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 32.62, which was above the industry average of 28.95. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-13.22.

Celgene Corporation 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) -$13.22
Graham Number $36.93
PEmg 32.62
Current Ratio 3.67
PB Ratio 15.31
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 $10,867,500,000
Total Current Liabilities $2,959,200,000
Long-Term Debt $13,788,500,000
Total Assets $28,085,600,000
Intangible Assets $15,257,600,000
Total Liabilities $21,486,300,000
Shares Outstanding (Diluted Average) 803,300,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.12
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
Dec1998 -$0.06
Dec1997 -$0.09

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.86
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
Dec2002 -$0.07
Dec2001 -$0.03

Recommended Reading:

Other ModernGraham posts about the company

Celgene Corp Valuation – December 2015 Update $CELG
Celgene Corporation Analysis – September 2015 Update $CELG
Celgene Corporation Stock Analysis – May 2015 Quarterly Update
28 Companies in the Spotlight This Week – 2/28/15
Celgene Corporation Quarterly Valuation – February 2015 $CELG

Other ModernGraham posts about related companies

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
Spectrum Pharmaceuticals Inc Valuation – Initial Coverage $SPPI
Abbott Laboratories Valuation – January 2017 $ABT
Johnson & Johnson Valuation – January 2017 $JNJ
Allergan plc Valuation – January 2017 $AGN
Impax Laboratories Inc – Initial Coverage $IPXL
Alexion Pharmaceuticals Inc Valuation – December 2016 $ALXN

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.

Celgene Corp Valuation – December 2015 Update $CELG

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 Celgene Corp (CELG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Celgene Corporation (Celgene), together with its subsidiaries, is an integrated biopharmaceutical company engaged primarily in the discovery, development and commercialization of therapies for the treatment of cancer and inflammatory diseases through gene and protein regulation. The Company’s primary commercial stage products include REVLIMID (lenalidomide), ABRAXANE, POMALYST/IMNOVID, VIDAZA, azacitidine for injection (generic version of VIDAZA), THALOMID (sold as THALOMID or Thalidomide Celgene outside the United States), OTEZLA (apremilast) and ISTODAX (romidepsin). Celgene is involved in research in a range of scientific areas designed to deliver therapies, targeting areas, including intracellular signaling pathways, protein homeostasis and epigenetics in cancer and immune cells, immunomodulation in cancer and autoimmune diseases, and therapeutic application of cell therapies.

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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 CELG – December 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 $88,072,638,269 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.23 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 -567.15% Fail
6. Moderate PEmg Ratio PEmg < 20 53.43 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 16.24 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 3.23 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.04 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

CELG value Chart December 2015

EPSmg $2.07
MG Growth Estimate 15.00%
MG Value $79.50
Opinion Overvalued
MG Value based on 3% Growth $29.94
MG Value based on 0% Growth $17.55
Market Implied Growth Rate 22.46%
Current Price $110.33
% of Intrinsic Value 138.78%

 

Celgene Corp does not qualify for either the Enterprising Investor or the more conservative Defensive Investor.  The Defensive Investor is concerned by the insufficient earnings growth or stability over the last ten years, lack of dividends, and the high PEmg and PB ratios.  The Enterprising Investor has concerns with the level of debt in relation to the net current assets as well as 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 overvalued after growing its EPSmg (normalized earnings) from $0.68 in 2011 to an estimated $2.07 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 22.46% 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 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 Celgene Corp (CELG)?  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

CELG Charts December 2015

Net Current Asset Value (NCAV) -$14.97
Graham Number $18.92
PEmg 53.43
Current Ratio 3.23
PB Ratio 16.24
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 Sep15
Total Current Assets $10,152,400,000
Total Current Liabilities $3,143,900,000
Long-Term Debt $14,297,900,000
Total Assets $27,369,200,000
Intangible Assets $15,457,800,000
Total Liabilities $21,993,700,000
Shares Outstanding (Diluted Average) 791,100,000

Earnings Per Share History

Next Fiscal Year Estimate $2.33
Dec14 $2.39
Dec13 $1.68
Dec12 $1.65
Dec11 $1.43
Dec10 $0.94
Dec09 $0.83
Dec08 -$1.73
Dec07 $0.27
Dec06 $0.09
Dec05 $0.09
Dec04 $0.08
Dec03 $0.04
Dec02 -$0.15
Dec01 $0.00
Dec00 -$0.03
Dec99 -$0.05
Dec98 -$0.06
Dec97 -$0.09
Dec96 -$0.08
Dec95 -$0.05

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.07
Dec14 $1.83
Dec13 $1.47
Dec12 $1.11
Dec11 $0.68
Dec10 $0.23
Dec09 -$0.11
Dec08 -$0.47
Dec07 $0.14
Dec06 $0.06
Dec05 $0.04
Dec04 $0.00
Dec03 -$0.03
Dec02 -$0.07
Dec01 -$0.03
Dec00 -$0.05
Dec99 -$0.07

Recommended Reading:

Other ModernGraham posts about the company

Celgene Corporation Analysis – September 2015 Update $CELG
Celgene Corporation Stock Analysis – May 2015 Quarterly Update
28 Companies in the Spotlight This Week – 2/28/15
Celgene Corporation Quarterly Valuation – February 2015 $CELG
30 Companies in the Spotlight This Week – 11/15/14

Other ModernGraham posts about related companies

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
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

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.

Celgene Corporation Analysis – September 2015 Update $CELG

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 – August 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 Celgene Corporation (CELG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Celgene Corporation (Celgene), together with its subsidiaries, is an integrated biopharmaceutical company engaged primarily in the discovery, development and commercialization of therapies for the treatment of cancer and inflammatory diseases through gene and protein regulation. The Company’s primary commercial stage products include REVLIMID (lenalidomide), ABRAXANE, POMALYST/IMNOVID, VIDAZA, azacitidine for injection (generic version of VIDAZA), THALOMID (sold as THALOMID or Thalidomide Celgene outside the United States), OTEZLA (apremilast) and ISTODAX (romidepsin). Celgene is involved in research in a range of scientific areas designed to deliver therapies, targeting areas, including intracellular signaling pathways, protein homeostasis and epigenetics in cancer and immune cells, immunomodulation in cancer and autoimmune diseases, and therapeutic application of cell therapies.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of CELG – August 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 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 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 Fail
6. Moderate PEmg Ratio PEmg < 20 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 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 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 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 $2.47
MG Growth Estimate 15.00%
MG Value $94.90
Opinion Overvalued
MG Value based on 3% Growth $35.74
MG Value based on 0% Growth $20.95
Market Implied Growth Rate 19.41%
Current Price $116.62
% of Intrinsic Value 122.88%

Celgene Corporation qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, 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 overvalued after growing its EPSmg (normalized earnings) from $0.68 in 2011 to an estimated $2.47 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 19.41% 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 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 Celgene Corporation (CELG)?  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

CELG Charts August 2015

Net Current Asset Value (NCAV) -$1.87
Graham Number $24.67
PEmg 47.31
Current Ratio 3.34
PB Ratio 15.22
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 $9,883,500,000
Total Current Liabilities $2,959,500,000
Long-Term Debt $6,256,100,000
Total Assets $17,745,700,000
Intangible Assets $6,128,700,000
Total Liabilities $11,423,800,000
Shares Outstanding (Diluted Average) 825,300,000

Earnings Per Share History

Next Fiscal Year Estimate $3.53
Dec14 $2.39
Dec13 $1.68
Dec12 $1.65
Dec11 $1.43
Dec10 $0.94
Dec09 $0.83
Dec08 -$1.73
Dec07 $0.27
Dec06 $0.09
Dec05 $0.09
Dec04 $0.08
Dec03 $0.04
Dec02 -$0.15
Dec01 $0.00
Dec00 -$0.03
Dec99 -$0.05
Dec98 -$0.06
Dec97 -$0.09
Dec96 -$0.08
Dec95 -$0.05

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.47
Dec14 $1.83
Dec13 $1.47
Dec12 $1.11
Dec11 $0.68
Dec10 $0.23
Dec09 -$0.11
Dec08 -$0.47
Dec07 $0.14
Dec06 $0.06
Dec05 $0.04
Dec04 $0.00
Dec03 -$0.03
Dec02 -$0.07
Dec01 -$0.03
Dec00 -$0.05
Dec99 -$0.07

Recommended Reading:

Other ModernGraham posts about the company

Celgene Corporation Stock Analysis – May 2015 Quarterly Update
28 Companies in the Spotlight This Week – 2/28/15
Celgene Corporation Quarterly Valuation – February 2015 $CELG
30 Companies in the Spotlight This Week – 11/15/14
Celgene Corporation Quarterly Valuation – November 2014 $CELG

Other ModernGraham posts about related companies

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
Mallinckrodt PLC Analysis – Initial Coverage $MNK
Biogen IDEC Inc. Analysis – July 2015 Update $BIIB
Vertex Pharmaceuticals Analysis – July 2015 Update $VRTX
Perrigo Company Analysis – July 2015 Update $PRGO
Amgen Inc. Analysis – June 2015 Update $AMGN

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.

Celgene Corporation Stock Analysis – May 2015 Quarterly Update

Celgene-logoBenjamin 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 – May 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 Celgene Corporation stock analysis giving a specific look at how Celgene Corporation (CELG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Celgene Corporation is a global biopharmaceutical company primarily engaged in the discovery, development and commercialization of therapies designed to treat cancer and immune-inflammatory related diseases. The Company’s commercial stage products include REVLIMID, VIDAZA, ABRAXANE, POMALYST/IMNOVID, THALOMID, ISTODAX and azacitidine for injection. The Company’s preclinical and clinical-stage pipeline includes Oral anti-inflammatory agents, OTEZLA (apremilast); Next generation thalidomide analogues, CC-122 and CC-220; Cellular therapies, PDA-001 and PDA-002; CC-486; Sotatercept and ACE-536; mTOR pathway inhibitors, CC-223 and CC-115; Epigenetic modifiers, EPZ-5676 and CC-292. Its subsidiaries are Celgene Avilomics Research and Celgene Cellular Therapeutics. The Company collaborated with Acceleron Pharma, Inc. (Acceleron) to develop sotatercept and ACE-536 to treat anemia in patients with rare blood disorders.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 3/7

  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 - FAIL
  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 $114.58
MG Value $108.08
MG Opinion Fairly Valued
Value Based on 3% Growth $40.71
Value Based on 0% Growth $23.86
Market Implied Growth Rate 16.16%
Net Current Asset Value (NCAV) -$1.26
PEmg 40.81
Current Ratio 4.61
PB Ratio 14.13

Balance Sheet – March 2015

Current Assets $9,665,000,000
Current Liabilities $2,097,000,000
Total Debt $6,303,000,000
Total Assets $17,481,000,000
Intangible Assets $6,194,000,000
Total Liabilities $10,716,000,000
Outstanding Shares 834,100,000

Earnings Per Share

2015 (estimate) $4.55
2014 $2.39
2013 $1.69
2012 $1.65
2011 $1.43
2010 $0.94
2009 $0.83
2008 -$1.73
2007 $0.27
2006 $0.09
2005 $0.09

Earnings Per Share – ModernGraham

2015 (estimate) $2.81
2014 $1.83
2013 $1.47
2012 $1.11
2011 $0.68
2010 $0.23

Dividend History
Celgene Corporation does not pay a dividend.

Conclusion:

Celgene Corporation is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the lack of earnings stability over the last ten years, the lack of dividends, as well as the high PEmg and PB ratios, while the Enterprising Investor has no initial concerns.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $0.68 in 2011 to an estimated $2.81 for 2015.  This level of demonstrated growth supports the market’s implied estimate of 16.16% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value falling 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 Celgene Corporation (CELG)?  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.

Celgene Corporation Quarterly Valuation – February 2015 $CELG

Celgene-logo

Celgene is suitable for the Enterprising Investor, but not the more conservative Defensive Investor, who is concerned with the lack of dividends, lack of earnings stability over the last ten years, as well as the high PEmg and PB ratios. The Enterprising Investor, on the other hand, is only concerned by the lack of dividends. As a result, the Enterprising Investor 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 $0.23 in 2010 to $1.83 for 2015. This demonstrated growth is very strong but does not support the market’s implied estimate of 29.37% annual earnings growth over the next 7-10 years. The ModernGraham valuation model operates under the assumption that no company can sustain such a high level of growth over the long term and therefore returns an estimate of intrinsic value below the market price at this time, leading to the conclusion that the company is overvalued by the market.

Be sure to check out previous ModernGraham valuations of Celgene Corporation (CELG) for greater perspective!

Read the full valuation on Seeking Alpha!

CELG Chart

CELG data by YCharts

Disclaimer:  The author held a long position in Celgene Corporation (CELG) 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.

Celgene Corporation Quarterly Valuation – November 2014 $CELG

Celgene-logo

Celgene Corporation is suitable for the Enterprising Investor, but not the Defensive Investor, who is concerned with the lack of earnings stability over the last ten years, the lack of dividend payments, and the high PEmg and PB ratios. The Enterprising Investor’s only issue with the company is the lack of dividend payments. As a result, the Enterprising Investor 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 $0.23 in 2010 to an estimated $2.25 for 2014. While this demonstrated growth is very strong, it does not support the market’s implied estimate of 19.69%. Such a high growth rate is most likely unsustainable, and conservative investors will be very hesitant to proceed with using any rate that high. As a result, the ModernGraham valuation model returns an estimate of intrinsic value below the market price at this time, and the company appears to be overvalued by the market.

Be sure to check out previous ModernGraham valuations of Celgene Corporation for better perspective.

Read the full valuation on Seeking Alpha!

CELG Chart

CELG data by YCharts

Disclaimer:  The author did not hold a position in International Business Machines (IBM) 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.

Celgene Corporation Quarterly Valuation – August 2014 $CELG

Celgene-logoBenjamin 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 Undervalued Companies for the Defensive Investor Near 52 Week Lows.  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 Celgene Corp (CELG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Celgene Corporation is a global biopharmaceutical company engaged in the discovery, development and commercialization of therapies designed to treat cancer and immune-inflammatory related diseases. It is engaged in the research and development, which is designed to bring new therapies to market, and is engaged in research in several scientific areas that may deliver therapies, focusing areas, such as intracellular signaling pathways in cancer and immune cells, immunomodulation in cancer and autoimmune diseases, and therapeutic application of cell therapies. Its primary commercial stage products include REVLIMID, VIDAZA, THALOMID, ABRAXANE and ISTODAX. Additional sources of revenue include a licensing agreement with Novartis, which entitles it to royalties on FOCALIN XR and the entire RITALIN family of drugs, the sale of services through its Cellular Therapeutics subsidiary and other miscellaneous licensing agreements. In March 2012, it acquired Avila Therapeutics.
CELG Chart

CELG data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 3/7

  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 – FAIL
  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 $85.39
MG Value $76.62
MG Opinion Overvalued
Value Based on 3% Growth $28.86
Value Based on 0% Growth $16.92
Market Implied Growth Rate 17.20%
Net Current Asset Value (NCAV) -$3.31
PEmg 42.91
Current Ratio 5.44
PB Ratio 14.07

Balance Sheet – 6/30/2014

Current Assets $8,107,000,000
Current Liabilities $1,491,600,000
Total Debt $6,743,300,000
Total Assets $15,601,900,000
Intangible Assets $6,517,000,000
Total Liabilities $10,750,600,000
Outstanding Shares 799,200,000

Earnings Per Share

2014 (estimate) $2.88
2013 $1.68
2012 $1.65
2011 $1.42
2010 $0.94
2009 $0.83
2008 -$1.73
2007 $0.26
2006 $0.08
2005 $0.09
2004 $0.08

Earnings Per Share – ModernGraham

2014 (estimate) $1.99
2013 $1.46
2012 $1.11
2011 $0.68
2010 $0.23
2009 -$0.12

Conclusion:

Celgene qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor has concerns with the lack of sufficient earnings stability over the last ten years, lack of dividend payments, and the high PEmg and PB ratios.  Meanwhile, 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 further research into the company and comparing it to other opportunities through a review of ModernGraham’s valuation of Amgen Inc. (AMGN).  As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $0.23 in 2010 to an estimated $1.99 for 2014.  While a strong level of demonstrated growth, it does not support the market’s implied estimate of 17.20% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.

Be sure to check out the previous ModernGraham valuations of Celgene Corp (CELG) 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 Celgene Corp (CELG)?  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 Celgene Corp (CELG) 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.

Celgene Corp (CELG) Quarterly Valuation – May 2014

Celgene-logoBenjamin 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 5 Undervalued Companies for the Enterprising Investor Near 52 Week Lows.  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 Celgene Corp (CELG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Celgene Corporation is a global biopharmaceutical company engaged in the discovery, development and commercialization of therapies designed to treat cancer and immune-inflammatory related diseases. It is engaged in the research and development, which is designed to bring new therapies to market, and is engaged in research in several scientific areas that may deliver therapies, focusing areas, such as intracellular signaling pathways in cancer and immune cells, immunomodulation in cancer and autoimmune diseases, and therapeutic application of cell therapies. Its primary commercial stage products include REVLIMID, VIDAZA, THALOMID, ABRAXANE and ISTODAX. Additional sources of revenue include a licensing agreement with Novartis, which entitles it to royalties on FOCALIN XR and the entire RITALIN family of drugs, the sale of services through its Cellular Therapeutics subsidiary and other miscellaneous licensing agreements. In March 2012, it acquired Avila Therapeutics.

CELG Chart

CELG data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 3/7

  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 – FAIL
  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 $146.79
MG Value $159.42
MG Opinion Fairly Valued
Value Based on 3% Growth $60.04
Value Based on 0% Growth $35.20
Market Implied Growth Rate 13.48%
Net Current Asset Value (NCAV) -$3.19
PEmg 35.45
Current Ratio 2.86
PB Ratio 13.11

Balance Sheet – 3/31/2014

Current Assets $6,942,000,000
Current Liabilities $2,425,100,000
Total Debt $4,224,300,000
Total Assets $12,704,500,000
Intangible Assets $4,813,700,000
Total Liabilities $8,219,900,000
Outstanding Shares 400,400,000

Earnings Per Share

2014 (estimate) $6.23
2013 $3.37
2012 $3.30
2011 $2.85
2010 $1.88
2009 $1.66
2008 -$3.46
2007 $0.52
2006 $0.17
2005 $0.18
2004 $0.16

Earnings Per Share – ModernGraham

2014 (estimate) $4.14
2013 $2.93
2012 $2.23
2011 $1.36
2010 $0.46
2009 -$0.23

Conclusion:

Celgene Corp is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned with the lack of earnings stability over the last ten years, lack of dividends, and the high PEmg and PB ratios.  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 very comfortable proceeding with further research into the company and comparing it to other opportunities through a review of 5 Low PEmg Companies for the Defensive Investor and 5 Undervalued Companies for Enterprising Investors.  From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $0.46 in 2010 to an estimated $4.14 for 2014.  This level of demonstrated growth is in line with the market’s implied estimate of 13.48% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is within a margin of safety relative to the market 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 Celgene Corp (CELG)?  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.

If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!

Disclaimer:  The author did not hold a position in Celgene Corp (CELG) or in any other company mentioned in the article at the time of publication and had no intention of changing that position within the next 72 hours.

Logo taken from wikipedia; this article is not affiliated with the company in any manner.

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