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About Incyte
If you were interested in gaining more insight on Incyte, you are at the right place, my friend.
On the other hand, if you were here to not be subjected to corny, well, let’s be honest, cringe, really, puns, then the exit doors are on the right-hand side and we apologize.
For those who are still here, we thank you and we also appreciate Wilmington, Delaware-headquartered biopharmaceutical company, Incyte, for giving us something to write about today, as, like most other biotechnology and healthcare-focused companies we have analyzed in the past, Incyte is certainly an interesting one that is rarely discussed, at least publicly, by the business news networks pundits of Wall Street, even though it is more of a larger, established player in the pharmaceutical space, more akin to those (but still not quite as large) such as the Mercks and the Pfizers of the world, as opposed to smaller biotechnology shops.
That’s where we come in.
Incyte is a pharmaceutical company that focuses the vast majority of its efforts and other resources on oncology (primarily cancer-related treatments) as well as other related immunotherapy solutions along with dermatology treatments as well , and like pretty much any other drug company in the world, the company develops, manufactures and sells its approved developments so as to potentially play a role in helping better one’s health or health-related circumstances through its manufactured solutions, with currently, many products already out on the market while some are still making their ways through the developmental and approval pipelines.
We’ve seen clinical-stage before and let’s just say we’re not the biggest of fans.
Of course, given the sheer amount of competition in the cancer treatment space(s) alone, Incyte has and will continue to have its work cut out for itself, however, in the drug industry, you don’t always necessarily need to be first to be among the best, as Incyte has certainly already established its presence within the oncology space (among others) and hopefully has some decent numbers to back its successes up.
Thankfully, from an objective investor’s standpoint, drug manufacturers, developers and sellers tend to be well insulated from greater overall economic turmoil and/or periods of economic contraction or recession given the urgency of the products they sell and while there has certainly been some stock price softening broadly across the pharmaceutical industry following what has so far been the worst of COVID-19, Incyte’s shares (NASDAQ: INCY) haven’t deviated from the pack, finding themselves down around 30% over this last year’s span of time, perhaps presenting a sort of opportunity as a result of the (hopefully) post-COVID selloff due to softening demand for COVID-19 vaccines and testing equipment.
At any rate, it would serve us all well if we delved a bit into this company’s core financial metrics, figures and other relevant ratios so as to determine whether or not this biopharmaceutical company’s stock is worth considering as a long-term investment.
So, let’s do just that.
Incyte’s stock financials
First and foremost, the company’s market capitalization (calculated by multiplying the number of its outstanding shares by its share price) stands at $11.75 billion, paired with a share price of $52.44 and a price-to-earnings (P/E) ratio of 27.86 along with no annually distributed dividend offered to its shareholders at the time of this publication.
Given this preliminary information, nothing surprises us all that much given that Incyte is more than likely keen on retaining and reinvesting most of the cash it generates (that is, if it even generates any at the moment) so as to sharpen and continue expanding its current pipeline, thus also rationalizing the fact that it does not offer shareholders a regular dividend.
Additionally, one could also note that the company has a price-to-earnings ratio that is a bit higher than the traditionally ascribed, fair value benchmark of 20, indicating that this company’s shares (NASDAQ: INCY) are trading at a more than modest premium, however, from our vantage point, if Incyte’s revenues are accelerating on a year-over-year (YOY) basis, there may be some objective room to justify paying a relative premium for an ownership stake in the company through its publicly issued shares.
With respect to state of the company’s balance sheet, Incyte’s executive team is presently at the helm of just about $5.8 billion in terms of total assets along with around $1.4 billion in terms of total liabilities, which is exactly the lean-styled balance sheet we were hoping to find, as it heavily insinuates that this firm has a lot of dry powder (just a fancy way of saying cash and equivalents thereof), which can also be confirmed by the numbers, as Incyte also reportedly maintains north of $3 billion in cash and cash equivalents alone, which, for being an operator in a research and development (R&D) intensive industry, is quite confidence invoking as a prospective shareholder.
Moving right along to the condition of the company’s income statement, Incyte’s total annual revenues since 2018 have definitely been trending in the right direction (well, rightwards and upwards, that is), as the company’s reported revenues stood just shy of $1.9 billion in 2018, $2.1 billion in 2019, $2.6 billion in 2020, nearly $3 billion in 2021, leading towards its latest reported revenue figure of a little over $3.3 billion, as reported in 2022 (as displayed on TD Ameritrade’s platform).
This sort of steady yet notable growth coming from Incyte through its annual revenue figures is certainly conducive to paying what one could call a mild premium for this company’s shares (NASDAQ: INCY), as this is a direct indication that the company is either receiving more approvals for its drug developments and/or is continuously gaining market share in the markets it already serves.
Either way, this is certainly a good sign, even though, of course, past performance doesn’t necessarily guarantee similar future outcomes, as is simply the case with any sort of business or essentially anything in this life.
At any rate, from the perspective Incyte’s cash flow statement, both the company’s net income and total cash from operations have been resoundingly positive and consistent-to-growing, for the most part, however, it can be found that this company did experience a negative year during 2020, suffering a net income loss of -$296 million and a corresponding total cash from operations loss of -$125 million, which, if we are correct in assuming that this company was avidly focused on researching and investing into new treatments during the onset of the Pandemic, the loss was well worth it, not to mention the fact that given the overall condition of its balance sheet, it can easily afford to absorb that loss, which, again, if our assumptions are accurate, will pay themselves off in the quarters and years that come, hopefully bearing some form of fruit as a result of the net income and total cash from operations loss.
Incyte’s stock fundamentals
As it relates to the company’s displayed trailing twelve month (TTM) net profit margin as shown on TD Ameritrade’s platform and how it particularly measures up with the competition’s cumulative average, Incyte evidently has a major leg up on the competition, as the company’s TTM net profit margin is listed as 11.78%, which may not appear monstrous at first, however, when it is being put up against the industry’s respective average of -437.53%, one could easily see the difference here, clearly favoring the corporation in question, as among the wide and deep sea of biopharmaceutical companies and oncology-focused pharmaceutical companies, Incyte has found a way to markedly separate itself from the pack, and we are happy to find that this is the case.
Additionally, as it relates to the company’s TTM return metrics with respect to its assets and investments, Incyte’s (also referencing the material found on TD Ameritrade’s platform) metrics in these respects have outdone themselves once again in comparison to the competition, as, for example, the company’s TTM return on investment is portrayed as 8.7% to the industry’s respective average of -7.69%, heavily implying that the company has been able to do a far better job at garnering returns on the previous and current investments it has made and continues to make, which should also be viewed as encouraging, all things considered, as Incyte and its management team will more than likely be able to continue this profit and return progress if it sticks to its playbook while also innovating and doing what it can to stay ahead of the competition curve.
Should you buy Incyte stock?
At face value, there aren’t a large amount of negatives to dwell over when it comes to Incyte and its stock given what we have gleaned from its core financials and other metrics.
With the state of heightened demand for specialty therapeutics and treatments, the cream must be and eventually will be separated from the regular old crop, and Incyte Corporation appears to be more of the cream persuasion.
It naturally operates and develops within a historically recession resistant landscape (at least, compared to other companies within other sectors), its balance sheet is total asset-heavy in a major way and it has plenty of cash on hand, its year-over-year (YOY) annual revenues have been growing at a significant rate, its cash flow is in a good position, not to mention the fact that its TTM net profit margin and TTM returns on both assets and investments are in excellent, more than competitive conditions as well.
While, of course, any company or security thereof maintains some level of risk, we still deem this company’s stock (NASDAQ: INCY) as being worthy of moderately paying a premium for given the aforementioned facts and figures and the way in which pharmaceutical demand continues to trend in terms of the coming years and decades.
All in all, we have no problem with offering this company’s stock a “buy” rating.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.