Illumina shares fell by -2.0% during the day's afternoon session, and are now trading at a price of $117.14. 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.
Illumina Has an Attractive P/B Ratio but a Worrisome P/E Ratio:
Illumina, Inc. develops, manufactures, and markets life science tools and integrated systems for large-scale analysis of genetic variation and function. 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, Illumina has a trailing 12 month P/E ratio of -4.4 and a P/B ratio of 2.82.
When we divide Illumina's P/E ratio by its expected EPS growth rate of the next five years, we obtain its PEG ratio of -23.11. Since it's negative, the company has negative growth expectations, and most investors will probably avoid the stock unless it has an exceptionally low P/E and P/B ratio.
Healthy Debt Levels but a Declining EPS Growth Trend:
| 2018-02-13 | 2019-02-12 | 2020-02-11 | 2021-02-17 | 2022-02-18 | 2023-02-17 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $2,752 | $3,333 | $3,543 | $3,239 | $4,526 | $4,584 |
| Gross Margins | 66.0% | 69.0% | 70.0% | 68.0% | 70.0% | 65.0% |
| Operating Margins | 22% | 26% | 28% | 18% | -3% | 8% |
| Net Margins | 26.0% | 25.0% | 28.0% | 20.0% | 17.0% | -96.0% |
| Net Income (MM) | $726 | $826 | $1,002 | $656 | $762 | -$4,404 |
| Net Interest Expense (MM) | -$18 | -$13 | $23 | -$8 | -$61 | -$15 |
| Depreciation & Amort. (MM) | -$156 | -$179 | -$188 | -$187 | -$251 | -$394 |
| Earnings Per Share | $4.91 | $5.54 | $6.72 | $4.43 | $4.98 | -$28.05 |
| EPS Growth | n/a | 12.83% | 21.3% | -34.08% | 12.42% | -663.25% |
| Diluted Shares (MM) | 148 | 149 | 149 | 148 | 153 | 157 |
| Free Cash Flow (MM) | $1,187 | $1,438 | $1,260 | $1,269 | $753 | $678 |
| Capital Expenditures (MM) | -$312 | -$296 | -$209 | -$189 | -$208 | -$286 |
| Net Current Assets (MM) | $692 | $1,437 | $1,748 | $1,592 | -$1,764 | -$2,092 |
| Long Term Debt (MM) | $1,182 | $890 | $1,141 | $673 | $1,695 | $1,487 |
Illumina has weak revenue growth and a flat capital expenditure trend, average net margins with a negative growth trend, and irregular cash flows. In addition, we note just enough current assets to cover current liabilities. We also note that the company benefits from healthy debt levels and wider gross margins than its peer group. However, the firm has declining EPS growth.
