If you are looking for as close to guaranteed winner when it comes to stocks, look no further than Celgege (NASDAQ: CELG). This stock got slaughtered last year and is still licking its wounds. But if you dig into this stock, you will see that Celgene is more than a bargain at these prices. In fact, the stock is a steal.
Learn the reasons why investing in Celgene now could be the smartest investment decision you ever make!
Celgene Gets Slammed
To fully understand why Celgene is a great buy now, we have to go back in time to October of 2017. Two things happened this month that caused the stock price to plummet 30%.
First, the company announced that it was ending two Crohn’s disease studies evaluating GED-0301. The reason why this was bad news was that Celgene paid more than $700 million upfront for this drug and now it will have to write off close to all of this amount.
Second, the company reported weaker than expected growth for Otezla, its main psoriasis drug.
Combining the two issues forced management to reduce the sales targets for the year and for revenues all the way out to the year 2021.
On the surface, reading these sounds like the stock dropping 30% is a no brainer. While the company is taking it on the chin for these two things happening, digging deeper into Celgene reveals things aren’t as bad as investors might think.
And in reality, the selloff that occurred could be more emotion than rational thinking.
Why Not All Is Bad For Celgene
So why do I think Celgene is a great investment now? Let’s first look at that drugs that are the primary revenue earners for Celgene.
All four of these drugs are growing in sales volume. What this means is that these drugs are popular and will continue to bring in more revenue for the company. If the growth of the revenues for these drugs were related to price increases, this would be another story.
So the company has solid drugs bringing in stable revenue. This is evident in the company’s latest earnings report. Earnings per share came in at $2.16, beating estimates by $0.05. Revenues also beat, this time by $110 million and were an increase of 17%.
As a result, the balance sheet of Celgene is strong.
Now we come to guidance. Even with revising guidance lower, management believes it can grow revenue by 46% from 2018 through 2020. This is a 13.5% compounded annual growth rate. The same applies to adjusted earnings, with estimates of a 19.5% compounded annual growth rate.
I’ll take those numbers from a company any day!
And that’s not the end of the good news. They have 2 powerful cancer drugs in the pipeline, one of which is set for approval in 2019. Celgene also has a few other drugs as well it is developing.
Now Is The Time To Buy Celgene
The stock price has never recovered from the sell off last October. Considering the price to earnings ratio is 23, this stock is a steal if they hit their guidance numbers.
And there is no reason to believe they won’t. The management at Celgene is a class act and will not disappoint. Sure they took a hit with the issues I noted above, but there is no way they are going to overestimate revised estimates. If anything, they will lower guidance on the conservative side to cover themselves.
Overall, Celgene is a stock to buy at these levels. And when other biotech companies get hit with bad news and emotion causes investors to react and sell Celgene out of fear, I’d be buying more shares then too.
With everything this company has going for it, and an annual growth rate of close to 20%, the stock at this level is a steal.
This author has no positions in any stock mentioned and does not plan to open any positions in any stocks mentioned for at least 72 hours after publication of this article.