Alkermes shares fell by -1.6% during the day's afternoon session, and are now trading at a price of $29.58. 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.
Alkermes's Valuation Is in Line With Its Sector Averages:
Alkermes plc, a biopharmaceutical company, researches, develops, and commercializes pharmaceutical products to address unmet medical needs of patients in the fields of neuroscience and oncology in the United States, Ireland, and internationally. The company belongs to the Health Care sector, which has an average price to earnings (P/E) ratio of 24.45 and an average price to book (P/B) ratio of 4.16. In contrast, Alkermes has a trailing 12 month P/E ratio of -32.2 and a P/B ratio of 4.88.
When we divideAlkermes's P/E ratio by its expected five-year EPS growth rate, we obtain a PEG ratio of 0.84, 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.
The Company Has a Positive Net Current Asset Value:
| 2019-12-31 | 2020-12-31 | 2021-12-31 | 2022-12-31 | |
|---|---|---|---|---|
| Revenue (MM) | $1,171 | $1,039 | $1,174 | $1,112 |
| Gross Margins | 40.8% | 44.8% | 48.6% | 80.4% |
| Operating Margins | -13.8% | -10.8% | -2.5% | -12.8% |
| Net Margins | -16.79% | -10.67% | -4.1% | -14.24% |
| Net Income (MM) | -$197 | -$111 | -$48 | -$158 |
| Net Interest Expense (MM) | 0 | -2 | -9 | -5 |
| Net Interest Expense (MM) | $0 | -$2 | -$9 | -$5 |
| Depreciation & Amort. (MM) | -$40 | -$39 | -$38 | -$36 |
| Earnings Per Share | -$1.25 | -$0.7 | -$0.3 | -$0.92 |
| EPS Growth | n/a | 44.0% | 57.14% | -206.67% |
| Diluted Shares (MM) | 157 | 159 | 161 | 166 |
| Free Cash Flow (MM) | -$19 | $41 | $73 | -$17 |
| Capital Expenditures (MM) | -$91 | -$42 | -$29 | -$38 |
| Net Current Assets (MM) | $321 | $253 | $380 | $342 |
| Current Ratio | 2.66 | 2.59 | 2.74 | 2.54 |
| Long Term Debt (MM) | $274 | $272 | $293 | $290 |
| LT Debt to Equity | 0.25 | 0.26 | 0.26 | 0.28 |
Alkermes has an excellent current ratio, healthy debt levels, and positive EPS growth. However, the firm suffers from slimmer gross margins than its peers and consistently negative margins with a stable trend. Finally, we note that Alkermes has stable revenues and decreasing reinvestment in the business and irregular cash flows.
