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Biotech / Medical : Biotech Valuation
CRSP 55.11-2.6%Nov 7 9:30 AM EST
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To: Biomaven who wrote (192)5/7/1999 11:13:00 AM
From: Harold Engstrom  Read Replies (2) of 52153
 
Peter, am coming over here for some advice and this looks like the properly-labelled forum for it. I really like Biogen (as you know) for its science, execution, and strong financials. But how do you value the company or a company like it?

This morning it trades at $94/share; earnings are roughly $2.40 current and $2.02 trailing; book value is roughly $13/share; cash is roughly $8/share; growth rate has been roughly 50% for the past few years; projected growth rate is roughly 20% (although it was the same 4 years ago); pipeline is expanding; first new products start to emerge in 2 years.

Personally, I'm not sure I would buy this company unless I knew it so well (at these prices). But, relatively speaking, it looks like a bargain compared to the rest of the biotech and pharmaceutical sectors. Amgen and big pharma seem pretty pricey and their growth rates don't currently match up nor do their prospects seem to have the same potential.

I guess my question is, are these valuations in general something that can last? Are they valid? Can they be valid when the time horizon that people hold stocks for continues to shrink - if people are not thinking long-term, how can they buy stocks based on long-into-the-future earnings potential?

So, do I buy more Biogen because it is undervalued relative to the market? Or do I sit tight and wait for the entire sector to correct to more conservative valuations? What do you think?
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