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.
