BioMarin Pharmaceutical Sets New 52 Week High Today

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
The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.