CELG Market Research & Analysis Report
Updated Jul 27, 2015

Celgene Corporation (NasdaqGS: CELG)

Trade Rationale:

Celgene Corporation (CELG) has demonstrated a pattern of bullish technical signs the company has matched five out of the last five analyst’s earnings estimates. The strong performance in the last quarter is offsetting the expensive valuation and high debt exposure. Our overall score for CELG is 5.91.

Stock Price Trends

Market cap 107.00B
Yesterday's close $134.90
52-weeks range $83.16 – $140.72
Technical analysis Bullish

CELG Score: 5.91

Intrinsic value of the stock 5
Financials 4
Sentiment 6
Analyst ratings 7
Earnings Consistency 7
Total Debt/Equity 3
Quarterly EPS change 7
Annual Earnings Growth 7
Current Price Level 8
P/E Ratio 1
Insider Ownership 3
Technical Analysis 7
Sector:Healthcare
Industry:Biotechnology

Growth and Balance Sheet

Celgene Corporation (CELG) reported net product sales of $2,254 million for the second quarter of 2015, a 22 percent increase from the same period in 2014. The negative net impact of currency on net product sales was 2 percent. Second quarter total revenue increased 22 percent to $2,278 million compared to $1,873 million in the second quarter of 2014. Adjusted net income for the second quarter of 2015 increased 36 percent to $1,019 million compared to $748 million in the second quarter of 2014. Adjusted diluted earnings per share (EPS) in the second quarter of 2015 was $1.23 which includes a $0.06 gain related to the sale of an equity investment upon completion of their acquisition by another company. For the same period in 2014, adjusted diluted EPS was $0.90. Based on U.S. GAAP (Generally Accepted Accounting Principles), Celgene reported second quarter of 2015 net income of $356 million or $0.43 per diluted share. For the second quarter of 2014, net income was $598 million or $0.72 per diluted share.  Adjusted R&D expenses were $477 million for the second quarter of 2015 compared to $397 million for the second quarter of 2014. The increase was primarily due to an increase in clinical trial activity across the portfolio. On a GAAP basis, R&D expenses were $1,110 million for the second quarter of 2015 and $457 million for the same period in 2014 primarily reflecting an increase in upfront collaboration expenses.

In the second quarter of 2015, Celgene purchased approximately 7.9 million of its shares at a total cost of approximately $902 million. In June, the share repurchase authorization was increased by an additional $4.0 billion. As of June 30, 2015, the Company had approximately $5.1 billion remaining authorization under the stock repurchase program, including the additional $4.0 billion.

Celgene expects full-year earnings in the range of $4.75 to $4.85 per share, with revenue in the range of $9 billion to $9.5 billion.

Valuation

Celgene Corporation (CELG)  P/E stands at 51.08 above the industry average of 31.39, and above the S&P 500 average of 17.50 The company is currently trading above the maximum P/E ratio of 15x, and over the last five years, the company’s shares have traded in the range of 31.50x to 58.80x trailing 12-month earnings. CELG's current Price/Sales of 13.08 is below the average of its industry of 19.15. CELG’s head to head comparison to its main competitors shows that the company has gross margin above its peers, and one that is above the industry average. The achieved operating margin of the company is above the average operating margin of the selected competitors, and it is above the industry average. The quarterly revenue is above the industry average. The stock is currently trading at its intrinsic value of $134.85 this suggests that the stock is fairly valued at these levels. The beta of 2.04 implies higher volatility of the stock with respect to the S&P 500. CELG has shown positive earnings consistency over the last five years. Company’s earnings have increased by 23.55% over the same period. The current quarter earnings in comparison to the same quarter last year have increased by 160.61%. CELG’s Total Debt/Equity of 100.63 is negative in our view but below the industry average. CELG’s current price levels are below the maximum level, is trading  4.30% below the 52 week high of $140.72, and the technical analysis give a bullish view of the stock. The majority of analyst ratings are bullish. CELG doesn’t pay any dividend.

About CELG

Celgene Corporation is a global biopharmaceutical company primarily engaged in the discovery, development and commercialization of therapies designed to treat cancer and immune-inflammatory related diseases. The Company’s commercial stage products include REVLIMID, VIDAZA, ABRAXANE, POMALYST/IMNOVID, THALOMID, ISTODAX and azacitidine for injection. The Company’s preclinical and clinical-stage pipeline includes Oral anti-inflammatory agents, OTEZLA (apremilast); Next generation thalidomide analogues, CC-122 and CC-220; Cellular therapies, PDA-001 and PDA-002; CC-486; Sotatercept and ACE-536; mTOR pathway inhibitors, CC-223 and CC-115; Epigenetic modifiers, EPZ-5676 and CC-292. Its subsidiaries are Celgene Avilomics Research and Celgene Cellular Therapeutics. The Company collaborated with Acceleron Pharma, Inc. (Acceleron) to develop sotatercept and ACE-536 to treat anemia in patients with rare blood disorders.

Competitor Comparison

CELG JNJ Industry
Market Cap 107.00B 274.95B 200.55M
Employees 6,012 127,300 43
Qtrly Rev Growth 0.22 -0.09 0.18
Revenue 8.43B 71.88B 8.65M
Gross Margin 0.89 0.70 0.58
EBITDA 3.21B 23.50B -9.91M
Operating Margin 0.34 0.28 -1.79
Net Income 2.20B 16.11B N/A
EPS 2.64 5.68 -0.29
P/E 51.08 17.47 31.39
PEG 1.13 3.32 N/A
P/S 13.08 3.87 19.15

Celgene Corporation (NasdaqGS: CELG) N.V.

Valuation
Market Cap 107.00B
Enterprise Value 106.50B
P/E 51.08
PEG Ratio 1.13
Price/Sales 13.08
Price/Book 16.34
EV/Revenue 12.64
EV/EBITDA 33.22
Dividend Yield N/A
Held by insiders 0.24%
   
CELG
Beta 2.04
1 Month Stock Returns 13.27%
Year to Date Stock Returns 20.60%
1 Year Stock Returns 56.51%
3 Year Stock Returns 61.54%
52-Week Change 535932%
S&P500 52-Week Change 5.09%
52-Week High 140.72
52-Week Low 83.16
50-Day Moving Average 120.54
200-Day Moving Average 118.14

Highlights

The Company’s primary commercial stage products include REVLIMID (lenalidomide), ABRAXANE, POMALYST/IMNOVID, VIDAZA, azacitidine for injection (generic version of VIDAZA), THALOMID (sold as THALOMID or Thalidomide Celgene outside the United States), OTEZLA (apremilast) and ISTODAX (romidepsin). Celgene is involved in research in a range of scientific areas designed to deliver therapies, targeting areas, including intracellular signaling pathways, protein homeostasis and epigenetics in cancer and immune cells, immunomodulation in cancer and autoimmune diseases, and therapeutic application of cell therapies. The stock closed yesterday’s trading session at $134.90. In the past year, the stock has hit a 52-week low of $83.16 and 52-week high of $140.72. CELG has a market cap of $107.00 billion and is part of the healthcare sector.

CELG Strengths
  • Leading position in oncology market
  • Strategic acquisition strengthening Celgene’s portfolio
  • S.T.E.P.S. program acting as effective barrier to generic competition  
CELG Weakness
  • Alleged improper marketing practices  
  • Strong competition

CELG Intrinsic Value

EPSttm 2.64 Year EPS
EPS GROWTH(Assumption) 1.10 2015 2.90
PE 51.08 2016 3.19
DIVEDEND PAYOUT 0% 2017 3.51
EXPECTED STOCK RETURN 1.10 2018
2019
2020
3.87
4.25
4.68
Forecasted Stock Price in 2022 349.77 2021 5.14
Earnings Per Share after 10th year 6.85 2022
2023
2024
5.66
6.22
6.85
TOTAL EPS 46.28
TOTAL DIVIDENDS 0.00
Forecasted Stock Price in 2022-Dividends 349.77
Net Present Value 134.85
EPS Growth Value
8.00% 112.24
8.50% 117.55
9.00% 123.08
9.50% 128.85
10.50% 141.11
11.00% 147.62
11.50% 154.41
Based on the prospects of the company the valuation range is from $112.24 to $154.41.

Stock Valuation Model & Intrinsic Value Definitions

Current Price Level

Investors should keep an eye open for stocks that are trading within 10% of their 52-week highs, as it is likely to continue in its upward trend. CELG's 52 week high is $140.72 current price is 134.90, is 4.30% below the 52 week high.

P/E Ratio

The Price/Earnings (P/E) ratio, based on the greater of the current PE or the PE using average earnings over the last 3 fiscal years, must be "moderate", which in this model states is not greater than 15. Stocks with moderate P/Es are more defensive by nature. The company has a P/E ratio of 51.08 above the average industry P/E ratio of 31.39 and is above the S&P 500 P/E ratio of 17.50.

Insider Ownership

When there is strong insider ownership which we define as 8% or more, management is more likely to act in the best interest of the company, as their interests are right in line with that of the shareholders. Insiders own 0.24% of CELG stock. Management's representation is not large enough. This does not satisfy our minimum requirement; companies that pass this test are more attractive to our valuation model

Technical Analysis

The model is using several technical indicators (MACD, RSI, MFI, OBV, position Indicators) to forecast the trend of the stock for 6 and 12 months, and assign a value.

CELG is trading in the range of $109.34 - $140.72 in the past 30 days. The stock has been showing support at $124.00 and resistance in the $139.00 range. The stock is trading above the 50-Day Moving Average and above the 200-Day Moving Average. The RSI(14) is 69.044. Our indicators give a bullish view on CELG.

Financials

The financial health of the company the higher the better, we evaluate all the financial ratios of the company.

Sentiment

Investor’s sentiment for the stock.

Analyst Ratings

The model assigns a value according to analyst’s recommendation for the stock. Analyst rating on Reuters.com is 10 Buy, 7 Outperform, 2 Hold, 1 Underperform and no Sell.

Earnings Consistency

We are searching for EPS numbers that are better than the previous year's. One dip is allowed, but the following year's earnings should be higher than the previous year. CELG’s annual EPS for the last 5 years were 0.94, 1.42, 1.65, 1.68, 2.39 this type of earnings action is positive.

Total Debt/Equity

The company must have a low Debt/Equity ratio, which indicates a strong balance sheet. The Debt/Equity ratio should not be greater than 25% or should be less than the average Debt/Equity for its industry. CELG’s have total debt/equity ratio of 100.63 which is negative.

EPS This Quarter VS Same Quarter Last Year

The EPS growth for this quarter relative to the same quarter a year earlier is above the minimum 15% that this model likes to see for a "good" growth company. Stocks with improving earnings are worthy of your extra attention. CELG’s EPS growth for this quarter relative to the same quarter a year earlier is 160.61%, above our target.

Annual Earnings Growth

This stock valuation model looks for annual earnings growth above 12%, but prefers higher than 20%. CELG’s annual earnings growth rate over the past five years is 23.55%, above the target growth rate.

1Tradespoon Score and Outlook: This score conveys Tradespoon’s long-term outlook of 1 to 5 years for a particular stock. Tradespoon uses proprietary methods to rate its trading picks on a scale from 1 to 10, with a 10 being the most favorable expected risk and return outlook. To determine a stock’s rating, Tradespoon uses an advanced algorithm that factors in fundamental and technical analysis to determine a stock's expected risk and return.