Neurocrine Biosciences Inc (NBIX, Financial) has recently shown a daily gain of 6.02% and a 3-month gain of 12.93%. With an Earnings Per Share (EPS) of $1.86, investors may wonder if the stock is modestly undervalued. This article delves into the company's valuation, offering a comprehensive analysis to address this question. Read on to understand the financial intricacies and investment potential of Neurocrine Biosciences.
Company Overview
Neurocrine Biosciences Inc is a pharmaceutical company focused on developing treatments for central nervous system and endocrine-related disorders. With a market cap of $12.60 billion and sales of $1.80 billion, the company's stock is currently trading at $128.45 per share. When compared to the GF Value of $148.27, it appears that Neurocrine Biosciences might be trading at a discount. This introductory comparison sets the stage for a deeper evaluation of the company's financial health and intrinsic value.
Understanding the GF Value
The GF Value is a unique measure that estimates the intrinsic value of a stock based on historical trading multiples, a GuruFocus adjustment factor, and future business performance projections. If a stock's price significantly exceeds the GF Value Line, it may be overvalued and could yield poor future returns. Conversely, if the price is well below the GF Value Line, the stock could be undervalued, suggesting higher potential returns. Neurocrine Biosciences, with its current price of $128.45 per share, is considered modestly undervalued, indicating that it may offer better long-term returns than its business growth alone would suggest.
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Financial Strength
Assessing a company's financial strength is crucial before investing. Neurocrine Biosciences boasts a cash-to-debt ratio of 4, outperforming 68.54% of its peers in the Drug Manufacturers industry. This strong financial position, with a financial strength rating of 9 out of 10, suggests a lower risk of permanent loss for investors.
Profitability and Growth
Investing in consistently profitable companies is generally less risky. Neurocrine Biosciences has maintained profitability for 5 out of the past 10 years, with a 19.5% operating margin that ranks higher than 83.11% of its industry counterparts. The company's profitability is deemed fair by GuruFocus standards.
Company growth is a vital valuation factor, often linked to long-term stock performance. Neurocrine Biosciences' 3-year average revenue growth rate surpasses 85.92% of the companies in the Drug Manufacturers industry, while its 3-year average EBITDA growth rate of 38.6% ranks better than 83.58% of the industry.
ROIC vs. WACC
A comparison of Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC) can reveal a company's profitability efficiency. Neurocrine Biosciences' ROIC of 20.78 is substantially higher than its WACC of 4.6, indicating value creation for shareholders.
Conclusion
In summary, Neurocrine Biosciences (NBIX, Financial) appears to be modestly undervalued. The company's strong financial condition and fair profitability, coupled with impressive growth metrics, suggest it could offer attractive long-term investment potential. For a detailed exploration of Neurocrine Biosciences' financials, interested investors can examine 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.
