About Regeneron Pharmaceuticals
For whatever reason, pharmaceutical companies and their stocks have been the word on the street at MacroHint.
Regeneron is by no means an exception.
Aside from having a name that sounds like one of the lost members of the Transformer’s, at its core Regeneron is a serious disease company, essentially focused on treating a variety of illnesses and diseases such as cancer, inflammatory issues, infectious diseases, as the company itself maintains many drugs and treatments within its pipeline.
As a sort of reference, Regeneron is home to commercial drugs such as Dupixent, Evkeeza, Eylea, Inmazeb, Kevzara, Libtayo, Praluent as well as a multitude of other drugs that aren’t out for commercial use quite yet but given the company’s track record, it wouldn’t be all that shocking if these drugs were eventually approved.
FDA and other relevant regulatory approval is in more instances than none what moves pharmaceutical company’s stock prices up and down.
Good or bad, it can also be noted that Regeneron’s share price (NASDAQ: REGN) has performed well over the past five years, particularly during the public onset of COVID-19. Needless to say, it is a pretty safe assumption that the company and its share price stand to gain a lot from more or further prolonged public health threats and concerns.
Good for the stock price but bad for humanity as a whole.
As briefly expanded upon in other recent stock analysis articles on companies in the pharmaceutical industry, the industry itself has proven itself to be fairly recession resistant, as regardless of the state of the global economy, there will always still be medical issues and complications that need to be tended to and resolved.
This is just a fact of life when it comes to pharmaceutical companies.
It is also where companies like Regeneron step in.
Nevertheless, although we view this as a fact of life, it wouldn’t be exactly wise to fall back on this altogether. Instead, it is imperative that we listen to what the numbers are saying about this founder-run, Westchester County-based pharmaceutical titan that is Regeneron.
Regeneron’s stock financials
Presently perched at a share price of a whopping $727, Regeneron’s stock is expensive but relatively cheap.
Allow us to explain.
While paying north of $700 for a single share of a company’s stock isn’t exactly accessible for many retail investors given how pricey it is, the stock price itself doesn’t appear to be overvalued. In fact, according to its current price-to-earnings (P/E) ratio, it seems as though the exact opposite is true. Specifically, Regeneron’s (NASDAQ: REGN) P/E as of this writing stands at 15.48, implying that the stock is modestly undervalued given the fact that a P/E of 20 signals that a company’s stock is trading at fair value or just about what it is currently worth relative to its intrinsic value.
Subsequently, anything lower than 20 implies that a stock is trading below fair value or at a discount.
While this stock certainly isn’t inexpensive, oddly enough, it is relatively cheap compared to its true value on the basis of share price.
As for some more additional information, the company also maintains a market capitalization of $79.1 billion and as discussed in previous stock analysis articles on companies in the pharmaceutical space, it is no surprise that the company doesn’t offer its shareholders an annual dividend given the constant investment and reinvestment that is required for companies like Regeneron to continue innovating and expanding its drug and treatment pipelines.
Venturing onto Regeneron’s balance sheet, the company and its management team tends to approximately $25 billion in total assets as well as almost $7 billion in total liabilities.
Clearly, Regeneron’s executive team does balance sheets right.
Although it’s somewhat expected for a company with such size, scale and global footprint as Regeneron, it should still be noted that the company’s executives have done an exemplary job at containing its total liabilities during times of peak inflation and omnipresent supply chain struggles plaguing not only the pharmaceutical industry, but practically every other sector as well.
As we’ve also mentioned in previous stock analysis articles, this is a company with a balance sheet seemingly ready for a recession.
As it relates to the company’s income statement, Regeneron’s total revenue over the last five years has been nothing short of fantastic as it has grown each year, starting at $5.8 billion in 2017 and since rising to just north of $16 billion in 2021. Of course, the public onset of COVID-19 has played a role in potentially ballooning the company’s total revenue especially in the last two years, however we don’t think it is too far-fetched for more health issues and COVID-19 variants to arise moving forward, which would undoubtedly benefit Regeneron’s future revenue(s) and likely its share price in the future too.
While there are certainly no guarantees in the world of business or the stock market itself, these are the opinions and conclusions we have drawn given previous and current facts and trends.
Should one reasonably expect Regeneron’s total revenue next year to double?
Nope, not from our perspective.
However, if one on the other hand were to guess that the company’s total revenue for 2022’s report were to stand somewhere in the neighborhood of $17 billion or $20 billion, we wouldn’t view this as an outlandish or outrageous assumption to make.
Onto the company’s cash flow statement, Regeneron’s net income and total cash from operations have shown just as much promise as well in that both have been generally rising (and positive) over the last five years. For example, the company’s total cash from operations stood at approximately $1.3 billion in 2017 and has since exponentially risen to around $7 billion, as reported in 2021.
Yes, COVID-19 helped the company in this regard but given the company’s current pipeline and past track record of success, we wouldn’t be exactly surprised if Regeneron’s total cash from operations and net income for that matter continued trending upwards.
Regeneron’s stock fundamentals
Profit is by no means a problem for Regeneron.
Simply put, the company’s trailing twelve month (TTM) net profit margin is currently flaunted at 39.17% compared to the industry’s average of -414.7%, according to TD Ameritrade’s platform.
If this doesn’t scream material difference, we have no idea what will.
Even for the pharmaceutical industry, which is well known to be a profitable one to begin with, Regeneron’s net profit margin appears to trounce the competition’s (average) by miles and then some. This could be attributed to the company’s diverse line(s) of products and treatments, many (if not all) of which are highly profitable by their very nature.
Whatever the reason(s) may be, this company’s TTM net profit margin is incredible compared to that of its peers.
When it comes to Regeneron’s TTM returns on assets and investment, they are both more than mildly higher than that of its peers as well. As a sort of reference, the company’s TTM returns on assets stand at just slightly below 21% while the industry’s average is presently set at almost -1%.
Like the company’s TTM net profit margin, this is a material difference that investors should not overlook.
Should you buy Regeneron Pharmaceuticals’ stock?
Given the current health and public safety landscape, the company’s strong net profit margin, its outstanding core returns, its recession proof nature and its current favorable valuation, there isn’t much to dislike about Regeneron.
This is a company with a solid, proven track record of providing for those it serves in a timely manner while also tending to its shareholders and their expectations, which as seen historically is a rather difficult balance to strike.
Nonetheless, Regeneron has done it and there doesn’t seem to be much in the way of preventing the company from continuing to deliver in the future.
We give Regeneron’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.