Exelixis shares fell by -1.83% during the day's afternoon session, and are now trading at a price of $16.86. Is it time to buy the dip? To better answer that question, it's essential to check if the market is valuing the company's shares fairly in terms of its earnings and equity levels.
Exelixis, Inc., an oncology-focused biotechnology company, is focused on the discovery, development, and commercialization of new drugs to treat cancers in the United States. The company belongs to the Consumer Cyclical sector, which has an average price to earnings (P/E) ratio of 22.33 and an average price to book (P/B) ratio of 3.12. In contrast, Exelixis has a trailing 12 month P/E ratio of 30.12 and a P/B ratio of 2.042.
When we divide Exelixis's P/E ratio by its expected five-year EPS growth rate, we obtain a PEG ratio of 0.316, which indicates that the market is undervaluing the company's projected growth (a PEG ratio of 1 indicates a fairly valued company). Your analysis of the stock shouldn't end here. Rather, a good PEG ratio should alert you that it may be worthwhile to take a closer look at the stock.
