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Celgene Shares Have Pulled Back, But Is It Enough?

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Celgene Corporation (NASDAQ: CELG) has rewarded shareholders for their optimism and patience with a run from the 2009 low of around $20 to the recent peak near $130.

Nothing grows straight up forever, though, and a little pullback in Celgene shares has taken place in recent days.

How much more of a pullback is warranted, though?

What The Bulls See

  • Net profit margins of 26.07 percent that spin off over $2.06 billion in positive levered free cash flow annually
    • Return on assets of 10.97 percent
    • Return on equity of 33.02 percent
  • $7.55 billion in cash versus total debt of $6.88 billion
  • Current ratio of 4.6
  • A reasonable PE of around 19 versus estimated revenue and earnings growth of 21.7 percent and 31.3 percent, respectively
  • Related Link: 3 Biotech Stocks Bucking Short-Interest Trends

    What The Bears See

    • A debt-to-equity ratio of 105.37 percent
    • A market capitalization of $95.01 billion that exceeds the market capitalization of $94.34 billion
    • A price-to-sales ratio of 12.28
    • A price-to-book ratio of 14.43

    The Technical Take

    Technicians note that Celgene shares are declining after testing the upper edge of the intermediate-term uptrend channel at around $129 recently (the resistance created by that line would now come in at $132 - $133). They have come down off that resistance and successfully held initial horizontal line support at $113.67.

    Should that level of support fail, the next test for Celgene would be the lower edge of the intermediate-term uptrend channel at around $104, which would also correspond with horizontal line support created by the November and December intra-month lows.

    Overall

    Celgene is very pricey by some metrics and not so pricey based on P/E ratios. The company is great fundamentally, so any rich valuations may be well-deserved.

    Any misstep by management, however, would be a trigger for significant selling pressure. Unless and until that happens, Celgene shares will likely be accumulated on dips to support.

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    Posted-In: Biotech Long Ideas Technicals Movers Trading Ideas General

     

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