Stock (Symbol) |
Celgene (CELG) |
Stock Price |
$113 |
Sector |
| Healthcare |
Data is as of |
| December 15, 2016 |
Expected to Report |
| Jan 27 |
Company Description |
 Celgene Corporation (Celgene), together with its subsidiaries, is an integrated biopharmaceutical company engaged primarily in the discovery, development and commercialization of therapies for the treatment of cancer and inflammatory diseases through gene and protein regulation. 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. Source: Thomson Financial |
Sharek’s Take |
 Celgene (CELG) is having a splendid 2016, but the stock isn’t reacting to the positive results. 2016 profits are expected to climb an impressive 26% this year, but like many growth stocks CELG is hovering around break even year-to-date. The big issue with growth stocks is for the past two years investors have gobbled up shares of value stocks. Fortunately, growth stock valuations are now enticing and I feel 2017 will be a banner year for them. Individually speaking, Celgene could continue to grow profits in the 20% range as it is expected to have 18 Phase III trials between mid-2016 through mid-2018. Celgene’s top-selling drug is Revlimid, which treats multiple myeloma, comprises 2/3rd of total sales and is growing at a double-digit rate. Last year CELG acquired Receptos, which has a drug Ozanimod in Phase 3 trials that could be better than the top MS drug on the market. Receptos could boost Celgene’s sales from $11 billion a year to $15 billion. Additionally, Ozanimod might also be effective against ulcerative colitis, Crohn’s disease, lupus or psoriasis. CELG is a safe stock with an Expected Long-Term Growth Rate of 23% a year. Since profits went up this year and the stock is basically flat, the P/E has fallen from 21 to 16. I love the potential of this company, and feel the stock is such a bargain that it could provide exceptional returns for years to come. Management uses cash to make acquisitions and buy back stock, and has a financial target of $13 in profits by 2020. |
One Year Chart |
 Celgene’s sales surged 28% last qtr as profits jumped 28% as well, and beat analysts estimates of 20% profit growth. Afterwards, 2016 profit estimates jumped up from $5.70 to $5.92, and qtrly estimates increased across the board as well. Analysts now expect profit growth of 34%, 23%, 20% and 16% the next 4 qtrs — and these have increased the last 2 qtrs. CELG has also beaten the street the last 3 qtrs so +20% growth could continue into the foreseeable future. You get all this — plus an Est. LTG of 23% per year — for only 16 times earnings. |
Fair Value |
 Just a short time ago this stock was selling for 25 times earnings. And now the stock is just 16x 2017 estimates. I’m just scratching my head here. Sure Trump wants to curtail drug prices, but CELG should have plenty of new drugs to drive profits in the future. My Fair Value is a pessimistic 20x earnings, which would mean a $141 stock in 2017 and $173 in 2018. |
Bottom Line |
 Celgene has been growing rapidly for more than a decade now, yet the stock has been stuck in neutral for more than two years. The company is profitable with a robust pipeline. But there’s concern the government will step in to reduce drug prices, and that’s affecting the valuation (P/E ratio). Ok, fine, the P/E was 25 in 2014 & 2015 so a P/E of 20 seems fair. Right now the P/E is just 16 and that’s just too low. I’m high on this stock for 2017 and beyond. CELG ranks 7th in the Growth Portfolio and Aggressive Growth Portfolio Power Rankings and 2nd the Conservative Stock Portfolio Power Rankings. |
Power Rankings |
Growth Stock Portfolio
7 of 35Aggressive Growth Portfolio 7 of 18Conservative Stock Portfolio 2 of 29 |
