Regeneron Pharmaceuticals Inc (REGN, Financial) has seen a daily gain of 1.09% and a 3-month gain of 14.72%, with an Earnings Per Share (EPS) (EPS) of 37.83. Despite these promising figures, the question remains: is the stock modestly overvalued? This article offers a comprehensive valuation analysis of Regeneron Pharmaceuticals, encouraging readers to delve into the financial details of this biotechnology giant.
Company Overview
Regeneron Pharmaceuticals Inc (REGN, Financial) is a leading name in the biotechnology industry, specializing in the discovery, development, and commercialization of products that combat eye disease, cardiovascular disease, cancer, and inflammation. The company boasts several marketed products, including Eylea, Praluent, Dupixent, Libtayo, and Kevzara, and is actively involved in developing monoclonal and bispecific antibodies. Additionally, Regeneron Pharmaceuticals is exploring new technology partnerships, including RNAi (Alnylam) and CRISPR-based gene editing (Intellia).
As of October 05, 2023, the company's stock price stands at $823.9, with a market cap of $89.40 billion. However, the company's estimated fair value, or GF Value, is $698.97, suggesting that the stock may be modestly overvalued.
Understanding GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line provides an overview of the stock's fair trading value. If the stock price significantly deviates from the GF Value Line, it may be overvalued or undervalued, influencing its future return.
Regeneron Pharmaceuticals' stock is currently estimated to be modestly overvalued based on the GF Value calculation. This implies that the long-term return of its stock is likely to be lower than its business growth.
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Financial Strength
Investing in companies with strong financial strength reduces the risk of permanent loss of capital. A great starting point for understanding a company's financial strength is reviewing its cash-to-debt ratio and interest coverage. Regeneron Pharmaceuticals' cash-to-debt ratio is 3.3, which is lower than 62.93% of the companies in the Biotechnology industry. However, the company's overall financial strength ranks 9 out of 10, indicating robust financial health.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is generally less risky. Regeneron Pharmaceuticals has been profitable for 10 out of the past 10 years, with an operating margin of 34.2%, ranking better than 95.33% of the companies in the Biotechnology industry. This indicates strong profitability.
Growth is a crucial factor in a company's valuation. Regeneron Pharmaceuticals' 3-year average revenue growth rate is better than 69.06% of the companies in the Biotechnology industry, and its 3-year average EBITDA growth rate is 25.8%, ranking better than 73.99% of the companies in the industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can provide insights into its profitability. Regeneron Pharmaceuticals' ROIC is 21.26, significantly exceeding its WACC of 6.14, indicating that the company is creating value for its shareholders.
Conclusion
In conclusion, Regeneron Pharmaceuticals' stock is estimated to be modestly overvalued. However, the company's strong financial condition, high profitability, and impressive growth rank make it a noteworthy contender in the Biotechnology industry. For a more detailed analysis of Regeneron Pharmaceuticals' financials, check out its 30-Year Financials here.
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