On July 20, 2023, AbbVie Inc (ABBV, Financial) saw an increase of 3.28% in its stock price, closing at $142.19. With a market cap of $250.9 billion and an earnings per share of $4.23, the pharmaceutical giant demonstrates robust financial metrics. According to GuruFocus, the GF Value of AbbVie, a measure of intrinsic worth, stands at $131.71, indicating that the stock is fairly valued.
AbbVie, a spin-off from Abbott in 2013, has a strong foothold in immunology and oncology. Its top drug, Humira, contributes to nearly half of the company's current profits. The company recently acquired Allergan, adding several new drugs in aesthetics and women's health to its portfolio.
Understanding the GF Value of AbbVie (ABBV, Financial)
The GF Value is an indicator of a stock's intrinsic value, calculated based on historical trading multiples, an adjustment factor from GuruFocus based on past performance and growth, and estimates of future business performance. If AbbVie's share price is significantly above the GF Value Line, the stock may be overvalued. Conversely, if it's below the GF Value Line, the stock may be undervalued. Currently, at $142.19 per share, AbbVie is considered fairly valued, with a market cap of $250.9 billion.
Given that AbbVie is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
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Assessing AbbVie's Financial Strength
Investing in companies with low financial strength can result in permanent capital loss. Hence, it's crucial to review a company’s financial strength before deciding to buy shares. AbbVie has a cash-to-debt ratio of 0.11, which ranks worse than 84.31% of companies in the Drug Manufacturers industry. GuruFocus ranks AbbVie’s financial strength as 4 out of 10, suggesting a poor balance sheet.
AbbVie's Profitability
AbbVie has been profitable 10 out of the past 10 years. Over the past twelve months, the company had a revenue of $56.7 billion and earnings per share of $4.23. Its operating margin is 29.73%, which ranks better than 94.68% of companies in the Drug Manufacturers industry. Overall, GuruFocus ranks AbbVie's profitability as 10 out of 10, indicating strong profitability.
Growth and Value Creation
Growth is a crucial factor in the valuation of a company. The 3-year average annual revenue growth of AbbVie is 13.4%, which ranks better than 72.04% of companies in the Drug Manufacturers industry. The 3-year average EBITDA growth rate is 18.2%, which ranks better than 65.65% of companies in the same industry.
Another method of determining profitability is to compare its return on invested capital (ROIC) to the weighted average cost of capital (WACC). AbbVie’s ROIC is 11.87, and its WACC is 6.25, implying the company is creating value for shareholders.
Conclusion
In summary, the stock of AbbVie (ABBV, Financial) is believed to be fairly valued. Despite its poor financial condition, the company's profitability is strong, and its growth ranks better than 65.65% of companies in the Drug Manufacturers industry. To learn more about AbbVie stock, you can check out its 30-Year Financials here.
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