BioMarin Pharmaceutical (BMRN) stock climbed 3.1 % this afternoon. According to our metrics, the company seems overvalued at today's prices. In the below analysis, we will put BioMarin Pharmaceutical's valuation in the context of its strong growth indicators and mixed market sentiment, which are also strong drivers for share price.
BioMarin Pharmaceutical Inc. develops and commercializes therapies for people with serious and life-threatening rare diseases and medical conditions. The large-cap Health Care company is based in San Rafael, United States and has 3,082 full time employees.
BMRN Has a Higher P/E Ratio Than the Sector Average
Compared to the Health Care sector's average of 24.45, BioMarin Pharmaceutical has a trailing twelve month price to earnings (P/E) ratio of 127.7 and an expected P/E ratio of 33.8. The P/E ratios are calculated by dividing the company's share price by its trailing 12 month of $0.78 or forward earnings per share of $2.95.
Earnings represent the net profits left over after subtracting costs of goods sold, taxes, and operating costs from the company's recorded sales revenue. One way of looking at the P/E ratio is that it represents how much investors are willing to pay for every dollar's worth of the company's earnings. Since BioMarin Pharmaceutical's P/E ratio is higher than its sector average of 24.45, we can deduce that the market is overvaluing the company's earnings.
BioMarin Pharmaceutical Is Fairly Valued in Terms of Expected Growth
Another factor pointing to BioMarin Pharmaceutical's value is its PEG ratio of 1.52. This is the stock's price to earnings ratio divided by its estimated earnings growth rate. If the resulting ratio is near or lower than 1 -- but higher than 0 -- its indicates that the company is faitly valued in terms of expected growth.
BMRN Has an Average P/B Ratio
Traditionally, stock pickers used to focus primarily on finding issues that were trading significantly below their tangible asset value, to guarantee themselves a margin of safety. But such an approach would screen out many valuable securities because many profitable businesses -- especially those that heavily leverage information technology -- simply do not have many tangible assets compared to more capital intensive companies.
Therefore, modern value investors tend to focus less on absolute price to book value (P/B) ratios. Instead of singling out stocks with a P/B ratio of less than 1, they will compare the target company against its peer group. For BioMarin Pharmaceutical, the P/B value is 4.0 while the average for the Health Care sector is 4.16.
BMRN's Weak Cash Flow Generation Is Troubling
The table below shows that BioMarin Pharmaceutical is not generating enough cash. A well run company will generally have cash flows that reflect the strength of its underlying business, and in BioMarin Pharmaceutical's case, free cash flow is growing at an average rate of 8.5% with a coefficient of variability of 838.7%. We can also see that cash flows from operations are evolving at a 38.2% rate, versus -5.3%:
| Date Reported | Cash Flow from Operations ($ k) | Capital expenditures ($ k) | FreeCashFlow ($ k) | YoY Growth (%) |
|---|---|---|---|---|
| 2022-12-31 | 175,902 | -131,540 | 44,362 | -76.06 |
| 2021-12-31 | 304,536 | -119,225 | 185,311 | 455.32 |
| 2020-12-31 | 85,365 | -137,519 | -52,154 | 54.71 |
| 2019-12-31 | 48,262 | -163,406 | -115,144 | n/a |
BioMarin Pharmaceutical Is Not a Profitable Business
If you are looking to make BMRN a long term investment, its weak margins may give you cause for concern. As you can see from the below, the company is generally losing money on each sale it makes. That being said, stock prices in the short term can be independent of a company's margins, and BioMarin Pharmaceutical's management may be able to make the business profitable in the future.
BioMarin Pharmaceutical's Gross Margins
| Date Reported | Revenue ($ k) | Cost of Revenue ($ k) | Gross Margins (%) | YoY Growth (%) |
|---|---|---|---|---|
| 2022-12-31 | 2,096,039 | 483,669 | 76.92 | 3.22 |
| 2021-12-31 | 1,846,275 | 470,515 | 74.52 | 3.76 |
| 2020-12-31 | 1,860,461 | 524,272 | 71.82 | -8.98 |
| 2019-12-31 | 1,704,048 | 359,466 | 78.91 | n/a |
BioMarin Pharmaceutical's Operating Margins
| Date Reported | TotalRevenue ($ k) | Operating Expenses ($ k) | Operating Margins (%) | YoY Growth (%) |
|---|---|---|---|---|
| 2022-12-31 | 2,096,039 | 1,570,808 | 1.98 | 149.13 |
| 2021-12-31 | 1,846,275 | 1,450,093 | -4.03 | 18.42 |
| 2020-12-31 | 1,860,461 | 1,428,016 | -4.94 | 32.88 |
| 2019-12-31 | 1,704,048 | 1,470,039 | -7.36 | n/a |
BioMarin Pharmaceutical's cost of revenue is growing at a rate of 7.7% in contrast to 1.7% for operating expenses. Sales revenues, on the other hand, have experienced a 5.3% growth rate. As a result, the average gross margins growth is -0.6 and the average operating margins growth rate is 6.1, with coefficients of variability of 4.1% and 110.6% respectively.
We See Mixed Market Signals Regarding BMRN
BioMarin Pharmaceutical has an average rating of buy and target prices ranging from $200.0 to $74.0. At its current price of $99.6, the company is trading -17.44% away from its target price of $120.64. 3.3% of the company's shares are linked to short positions, and 101.2% of the shares are owned by institutional investors.
| Date Reported | Holder | Percentage | Shares | Value |
|---|---|---|---|---|
| 2022-12-31 | Primecap Management Company | 9% | 17,580,859 | $1,751,053,529 |
| 2022-12-31 | Vanguard Group, Inc. (The) | 9% | 17,365,080 | $1,729,561,941 |
| 2022-12-31 | Blackrock Inc. | 8% | 14,540,191 | $1,448,203,001 |
| 2022-12-31 | Dodge & Cox Inc | 8% | 14,383,663 | $1,432,612,812 |
| 2022-12-31 | Baker Brothers Advisors, LLC | 4% | 7,620,494 | $759,001,190 |
| 2022-12-31 | Capital Research Global Investors | 3% | 5,651,001 | $562,839,690 |
| 2022-12-31 | State Street Corporation | 3% | 5,388,844 | $536,728,854 |
| 2022-12-31 | Viking Global Investors, L.P. | 3% | 5,273,620 | $525,252,543 |
| 2022-12-31 | Ameriprise Financial, Inc. | 2% | 4,648,628 | $463,003,341 |
| 2022-12-31 | Janus Henderson Group PLC | 2% | 3,888,444 | $387,289,016 |
