Stock (Symbol) |
Illumina (ILMN) |
Stock Price |
$173 |
Sector |
| Healthcare |
Data is as of |
| September 19, 2016 |
Expected to Report |
| Oct 18 – 24 |
Company Description |
 ILMN offers integrated systems, consumables and analysis tools for genetic analysis. It also manufactures sequencing and array platforms, reagent kits and scanning equipment. Its customers include genomic research centers, academic institutions, government laboratories, hospitals and reference laboratories, pharmaceutical, biotechnology, agrigenomics, commercial molecular diagnostic and consumer genomics companies. Its sequencing instruments perform a range of nucleic-acid analyses across a range of sample sizes. Its products and services are used for basic analysis and research, including de novo sequencing, genetic variation analysis, epigenetics and targeted screening, among others. It also provides products and services for other life sciences applied markets, such as agrigenomics. It also offers Clarity Run Manager, Clarity LIMS Silver and Clarity LIMS Gold. Source: Thomson Financial |
Sharek’s Take |
 Illumina (ILMN) is an amazing company. Illumina is the king of gene sequencing, developing state of the art machines that sell for $1 million or more. The company is even developing a medical device that can detect cancer (though ILMN might spin that off into a separate company). The stock used to carry a 60 P/E as profits climbed 52% and 21% in 2014 and 2015. But now growth has slowed. ILMN has had profit growth of 4%, -7%, -22% and 7% the last 4 qtrs as the stock has stock has traveled back-and-forth between $125 and $200. Now at $175 ILMN sells for 48x earnings, which is rich when profits aren’t growing 30%. Although growth is stagnant now, things look better on the horizon as profits are expected to climb 16% next year. The gene sequencing industry is also young and expanding, with industry growth expected to be around 25% a year long-term. Overall I like Illumina and wish I would have purchased it last qtr when it was around $135. Now with the stock having rallied a lot with a P/E of 48 I will stay on the sidelines and hope it comes down so I can climb aboard. |
One Year Chart |
 The biggest difference with ILMN today compared to the past few qtrs is profit estimates didn’t decrease — but instead increased. 2016 estimates just went from $3.38 to $3.53 (which is still less than the $3.79 the company was expected to earn a couple qtrs earlier). Last qtr the company had 7% profit growth on 11% sales growth. This Est LTG of 16% seems too low, I feel profits should grow 30% or so long-term. But I’m not an expert on this stock or the industry. Estimates show profits are expected to climb 14%, 30%, 30% and 14% the next 4 qtrs. |
Fair Value |
 I missed my chance to get this stock when it was lower, and now maybe I should plan ahead for a dip in 2017. My Fair Value on ILMN is 35x earnings. Looking at 2017 estimates that gives me a Fair Value of $143 next year. I think I should buy in if the stock gets to around that level again. |
Bottom Line |
 Illumina is what I consider a core growth stock with amble room for long-term growth. But the stock has been on some wild runs the past ten-years, and with a high P/E I’m being overly cautious. Now that it’s run up from $138 to $173 during the past qtr, I’m not going to jump in now — especially since growth is still slow and the P/E is 48. This company is technologically advanced, in a rapidly growing industry, and we should keep an eye out for a correction as an opportunity to buy in. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
