AbbVie Inc (ABBV, Financial) experienced a daily gain of 3.69%, with a 3-month loss of -5.73%. The Earnings Per Share (EPS) stands at 4.86. With these figures in mind, the question arises: is AbbVie (ABBV) fairly valued? This article aims to provide a comprehensive valuation analysis of AbbVie, encouraging readers to delve into the financial intricacies of this pharmaceutical giant.
Company Overview
AbbVie is a pharmaceutical company with strong exposure to immunology and oncology. The company's top drug, Humira, accounts for nearly half of its current profits. AbbVie was spun off from Abbott in early 2013, and the recent acquisition of Allergan added several new drugs in aesthetics and women's health. The company's stock price stands at $144.06 with a GF Value of $131.74, suggesting it is fairly valued. With a market cap of $254.30 billion and sales of $56 billion, AbbVie is a significant player in the pharmaceutical industry.
Understanding the GF Value
The GF Value is a unique valuation method that estimates a stock's intrinsic value. It is based on historical trading multiples, an internal adjustment factor considering the company's past performance and growth, and future business performance estimates. If the stock price is significantly above the GF Value Line, the stock may be overvalued and expected to deliver poor future returns. Conversely, if it is significantly below the GF Value Line, the stock may be undervalued and expected to offer high future returns.
According to the GF Value, AbbVie (ABBV, Financial) appears to be fairly valued. As such, the long-term return of its stock is likely to be close to the rate of its business growth.
Financial Strength
Investing in companies with poor financial strength can increase the risk of permanent capital loss. Therefore, it is vital to thoroughly review a company's financial strength before deciding to invest. AbbVie's cash-to-debt ratio is 0.14, lower than 79.69% of 1039 companies in the Drug Manufacturers industry, indicating poor financial strength.
Profitability and Growth
Investing in profitable companies generally carries less risk. AbbVie has been profitable for 10 out of the past 10 years. With an operating margin of 32.31%, better than 95.85% of 1035 companies in the Drug Manufacturers industry, AbbVie's profitability is strong.
Growth is an essential factor in a company's valuation. AbbVie's 3-year average annual revenue growth is 13.4%, ranking better than 72.19% of 917 companies in the Drug Manufacturers industry. The 3-year average EBITDA growth rate is 18.2%, ranking better than 66.21% of 879 companies in the same industry.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) and the Weighted Average Cost of Capital (WACC) can provide insight into its profitability. For the past 12 months, AbbVie's ROIC is 12.91, and its WACC is 7.54, indicating a healthy profitability ratio.
Conclusion
In conclusion, AbbVie's stock appears to be fairly valued. Despite its poor financial strength, the company's strong profitability and growth potential make it an interesting prospect for investors. To learn more about AbbVie's financials, check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
