Is Legend Biotech (LEGN) an Overvalued Stock?

Legend Biotech may be overvalued with poor growth indicators, but the 10 analysts following the company give it an average rating of buy. The analysts have set target prices ranging from $65.0 to $87.0 per share, for an average of $72.8. At today's price of $54.75, Legend Biotech is trading -24.79% away from its average target price, suggesting there is an analyst consensus of strong upside potential.

Legend Biotech Corporation, a clinical-stage biopharmaceutical company, through its subsidiaries, engages in the discovery, development, manufacturing, and commercialization of novel cell therapies for oncology and other indications in the United States, China, and internationally. Based in Somerset, NJ, the mid-cap Health Care company has 1,390 full time employees. Legend Biotech has not offered a dividend during the last year.

Legend Biotech does not have a meaningful trailing P/E ratio since its earnings per share are negative. Its forward EPS guidance is negative too, at -1.65. The average P/E ratio for the Health Care sector is 24.45. Furthermore, Legend Biotech is likely overvalued compared to its book value, since its P/B ratio of 12.1 is higher than the sector average of 4.16.

If analysts are giving the the company a decent rating despite its hefty price point, it could be related to its strong cash flows. You can see for yourself in the financial summary table below:

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue (k) $57,264 $75,676 $89,792 $117,005
Revenue Growth n/a 32.15% 18.65% 30.31%
Gross Margins n/a n/a n/a 44.1%
Gross Margins Growth n/a n/a n/a n/a
Operating Margins -236.4% -302.9% -415.4% -391.5%
Operating Margins Growth n/a -28.13% -37.14% 5.75%
Net Margins -232.21% -401.02% -430.12% -381.48%
Net Margins Growth n/a -72.7% -7.26% 11.31%
Earnings Per Share -$1.33 -$2.26 -$2.86 -$2.94
EPS Growth n/a -69.92% -26.55% -2.8%
Diluted Shares (MM) 100 118 141 165
Free Cash Flow (k) -$122,235 -$223,005 -$198,465 -$222,304
FCF Growth n/a -82.44% 11.0% -12.01%
Capital Expenditures (k) -$39,170 -$49,776 -$47,112 -$22,275
LT Debt to Equity nan nan 0.26 0.35
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.