5 Essential Facts About Elanco Animal Health

Elanco Animal Health shares fell by -1.7% during the day's afternoon session, and are now trading at a price of $14.54. 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.

Elanco Animal Health Has an Attractive P/B Ratio but a Worrisome P/E Ratio:

Elanco Animal Health Incorporated, an animal health company, innovates, develops, manufactures, and markets products for pets and farm animals. The company belongs to the Health Care sector, which has an average price to earnings (P/E) ratio of 30.21 and an average price to book (P/B) ratio of 4.08. In contrast, Elanco Animal Health has a trailing 12 month P/E ratio of -6.3 and a P/B ratio of 1.17.

When we divide Elanco Animal Health's P/E ratio by its expected EPS growth rate of the next five years, we obtain its PEG ratio of -2.48. 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.

Increasing Revenues but Narrowing Margins:

2018 2019 2020 2021 2022 2023
Revenue (MM) $3,067 $3,071 $3,271 $4,764 $4,411 $4,411
Revenue Growth n/a 0.14% 6.51% 45.64% -7.41% 0.0%
Operating Margins 4% 3% -21% -12% -2% -26%
Net Margins 3% 2% -18% -10% -2% -26%
Net Income (MM) $86 $68 -$574 -$483 -$78 -$1,144
Net Interest Expense (MM) $30 $79 $150 $236 $241 $272
Depreciation & Amort. (MM) $296 $314 $517 $716 $682 $691
Earnings Per Share $0.28 $0.18 -$1.3 -$0.99 -$0.16 -$2.32
EPS Growth n/a -35.71% -822.22% 23.85% 83.84% -1350.0%
Diluted Shares (MM) 314 370 441 487 488 493
Free Cash Flow (MM) $353 $84 -$160 $357 $315 -$11
Capital Expenditures (MM) $134 $140 $119 $126 $137 $138
Current Ratio 2.58 2.9 1.65 1.99 1.93 2.82
Total Debt (MM) $2,472 $2,380 $6,682 $6,613 $6,224 $5,909

Elanco Animal Health has consistently negative margins with a negative growth trend, declining EPS growth, and positive cash flows. On the other hand, the company benefits from growing revenues and a flat capital expenditure trend and an excellent current ratio. Furthermore, Elanco Animal Health has an average amount of debt.

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.

IN FOCUS