Celgene (NASDAQ: CELG) is stuck in the dog house after failing to properly file ozanimod’s approval with the U.S. Food and Drug Administration. The outlook for that product worsened when Morgan Stanley forecast an extended timeline (delay) for the drug, suggesting it will take over a year to refile. So after the earnings report, which had areas of strength, are the fundamentals good enough to consider CELG stock a good investment?
Celgene reported first-quarter results that beat consensus. EPS of $2.05 beat by $0.09 and revenue, up ~ 20%, totaled $3.54 billion. At a P/E of 16 times, the stock is considerably undervalued relative to the strong growth.
The forward P/E of 8.4 times (on 20% EPS growth over the next five years) reflects a lack of investor confidence in Celgene’s future. A quick DCF calculation (links to finbox.io) on the stock suggests the fair value is $115, assuming revenue growing in the low teens and EBITDA as a percentage of revenue at 30%.
Despite the quarterly results, Celgene’s management needs a reshuffling due to the poor handling of the ozanimod filing. The acquisition cost the company plenty of money and staff resources. Delaying a new product to market only worsens the time for getting those returns back to the investor.
Celgene is not like Gilead Sciences (NASDAQ: GILD) because the stock trades a low multiples and has growth potential ahead.
