Biogen Inc (BIIB, Financial) experienced a daily gain of 2.32%, despite a 3-month loss of -11.75%. The company's Earnings Per Share (EPS) stands at 18.37. This raises the question: Is Biogen (BIIB) modestly overvalued? The following analysis aims to answer this question through a comprehensive valuation assessment.
An Introduction to Biogen Inc (BIIB, Financial)
Biogen and Idec merged in 2003 to market Biogen's multiple sclerosis drug Avonex and Idec's cancer drug Rituxan. Today, Biogen has several drug candidates in phase 3 trials in neurology and neurodegenerative diseases. The company's stock price is currently $277.51, with a market cap of $40.20 billion. The GF Value, an estimation of its fair value, is $228.1.
Understanding the GF Value of Biogen (BIIB, Financial)
The GF Value represents the current intrinsic value of a stock derived from our unique method. It is calculated based on historical multiples, a GuruFocus adjustment factor, and future business performance estimates. According to this method, Biogen appears to be modestly overvalued.
Financial Strength of Biogen
Investing in companies with poor financial strength can lead to a higher risk of permanent loss of capital. Therefore, it's crucial to review a company's financial strength before investing. Biogen's cash-to-debt ratio is 0.92, which is better than 50.97% of companies in the Drug Manufacturers industry. Overall, Biogen's financial strength is fair.
Profitability and Growth of Biogen
Investing in profitable companies is generally less risky, especially if they show consistent profitability over the long term. Biogen has been profitable for the past 10 years, with an operating margin of 24.99%. However, the 3-year average annual revenue growth rate of Biogen is -3.2%, which is lower than 75.41% of companies in the Drug Manufacturers industry.
ROIC vs WACC
Another way to determine a company's profitability is to compare its Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC). For the past 12 months, Biogen's ROIC is 12.88, and its WACC is 4.27, indicating the company is creating value for shareholders.
Conclusion
In conclusion, the stock of Biogen appears to be modestly overvalued. The company's financial condition is fair, and its profitability is strong. However, its growth ranks lower than 77.65% of companies in the Drug Manufacturers industry. For more information about Biogen stock, you can check out its 30-Year Financials here.
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