Bulls, Bears Squaring Off At Biogen
Biogen Inc (NASDAQ: BIIB) has been a huge winner for many years now, rising from below $40 in 2008 to over $475 in recent weeks, with only one decline of over 20 percent during that time.
With that kind of price appreciation, it should not be a surprise to anyone that the company's valuations are very, very rich at this point – even after the recent little pullback.
So, how much of a consolidation will be needed for aspiring bulls to feel confident again? Let's take a look.
What The Bulls See
- Net profit margins of 30.25 percent that spin off over $2.65 billion in positive levered free cash flow annually
- Return on equity of 18.94 percent
- Return on assets of 30.27 percent
- Cash of $1.85 billion versus total debt of $585.2 million
- A debt-to-equity ratio of 5.41 percent
- A current ratio of 2.11
What The Bears See
- A market capitalization of $100.85 billion that exceeds the company's estimated enterprise value of $99.59 billion
- A price-to-sales ratio of 10.37
- A price-to-book ratio of 9.31
- A P/E ratio of over 21 versus estimated revenue and EPS growth rates for the next year of 12.5 percent and 17.3 percent, respectively
The Technical Take
Technicians note that Biogen shares have come down sharply off of the recent peak, but that there still may be some more downside left before the selling is all done. They do note, however, that Biogen could bounce for a few days before that downside momentum ramps up again.
Resistance for any rally will come in at Wednesday's downside gap open at $449.06.
Above that, the closing high from March 20 at $475.98 may come into play.
In terms of downside targets, the first target would be the short-term uptrend line at $401.79. Below that, horizontal line support at $355 or so would be the next destination for a falling Biogen.
Biogen has nearly perfect fundamentals with huge cash flows, fat margins, a clean balance sheet and strong management effectiveness metrics. However, for those strong "fundies," they're paying a major premium in terms of valuation.
If the company continues to execute fundamentally, any short-term dips in price in Biogen shares will continue to be bought by eager buyers. The first target for such buying will likely be at $401.79.
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