Bull of the Day: Biogen Idec (BIIB) - Bull of the Day
28 August 2013 - 6:30PM
Zacks
The biotech space is likely to find greater focus in the wake
Amgen’s (AMGN) purchase of ONXY Pharmaceuticals (ONXX).
Investors looking for strong growth at a reasonable price in
the biotech sector may want to buy into the
Biogen
Idec (BIIB) story. This Zacks Rank #1 (Strong Buy)
is experiencing robust upward revisions to earnings estimates and
is priced at an attractive valuation.
Earnings trend:
Within the past 30 days, earnings estimates for each of 2013 and
2014 have been revised up five times, while no earnings estimates
have been cut. The graphic displays the trend in earnings
revisions.
The Zacks Earnings per share Consensus Estimates for 2013 and
2014 have been lifted 9.3% to $8.75 and 17.0% to $11.58
respectively over the past 30 days. 2014 profits are expected
to rise 32.0% year over year.
Sales growth is strong and expected to rise 24% in 2013 and
another 18.7% in 2014.
The stock is inexpensive:
Biogen Idec is priced with a PEG ratio (earnings per share
divided by earnings growth) of 0.95. The PEG ratio is not
only below 1.0, but under the ten year median value of 1.38.
Investors are not paying a premium for the growth outlook and the
stock is trading at a discount to its historical valuation
level.
Further, it is trading about 20 times forward 12 month earnings,
which is about in line with the ten year median. However, the Zacks
Drug sector is trading at 16.6 times forward 12 month earnings
compared to its median of 14.7. On a relative 12 month
forward PE basis, Biogen Idec looks cheap compared to its pharmacy
peers.
The pipeline is strong:
Biogen Idec has a healthy pipeline of products to support the
favorable earnings picture. It has three drugs,
ALPROLIX (Hemophilia B), ELOCTATE (Hemophilia A), and PLEGRIDY
(Multiple Sclerosis) which have moved past Phase III and have been
filed with the FDA for approval. It also has three drugs in
Phase III focused on forms of Leukemia and Non-Hodgkin’s Lymphoma
and Multiple Sclerosis, and three drugs in Phase II for treatment
of Lupus Nephritis, Optic Neuritis, and Idiopathic Pulmonary
Fibrosis.
Fed taper not an issue:
With all the worry over the impact of Fed tapering and rising
interest rates, Biogen Idec has shown a negative correlation to the
10 year treasury yield since 2000. It is a stock which should
not get caught up in the outlook for Fed policy. The stock
has tended to move higher while interest rates have declined over
the ten year period. The correlation between the 10 year
treasury and Biogen Idec has been -0.68, but the correlation seems
more linked to secular trends in the assets than economic
conditions.
Conclusion:
If you are looking for an opportunity in biotech, don’t pass
over Biogen Idec. Buy into the story of strong earnings
growth at a reasonable price.
AMGEN INC (AMGN): Free Stock Analysis Report
BIOGEN IDEC INC (BIIB): Free Stock Analysis Report
ONYX PHARMA INC (ONXX): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
Onyx Pharmaceuticals, Inc. (MM) (NASDAQ:ONXX)
Historical Stock Chart
From Jun 2024 to Jul 2024
Onyx Pharmaceuticals, Inc. (MM) (NASDAQ:ONXX)
Historical Stock Chart
From Jul 2023 to Jul 2024