Celgene Shares Have Pulled Back, But Is It Enough?

Celgene CorporationCELG

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 CELG shares has taken place in recent days. How much more of a pullback is warranted, though?

What The Bulls See In Celgene

Net profit margins of 26.07 percent that spin off over $2.06 billion in positive levered free cash flow annually
Good management effectiveness metrics:

Return on assets of 10.97 percent
Return on equity of 33.02 percent

Some good balance sheet metrics:

$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

What The Bears See In Celgene

A debt-to-equity ratio of 105.37 percent
Some rich valuation metrics:

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 On Celgene Shares

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). The have come down off of 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 the PE. 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. If you are so inclined (to be buying CELG), do so near support and honor thy stops!

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