We've been asking ourselves recently if the market has placed a fair valuation on Exelixis. Let's dive into some of the fundamental values of this Mid-Cap Health Care company to determine if there might be an opportunity here for value-minded investors.
an Increase in Expected Earnings Improves Its Value Outlook but Its Shares Are Expensive:
Exelixis, Inc., an oncology company, focuses on the discovery, development, and commercialization of new medicines for difficult-to-treat cancers in the United States. The company belongs to the Health Care sector, which has an average price to earnings (P/E) ratio of 26.07 and an average price to book (P/B) ratio of 3.53. In contrast, Exelixis has a trailing 12 month P/E ratio of 22.9 and a P/B ratio of 3.58.
Exelixis's PEG ratio is 1.53, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
Increasing Revenues but Narrowing Margins:
| 2017 | 2018 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $452 | $854 | $968 | $988 | $1,611 | $1,830 |
| Operating Margins | 37% | 51% | 38% | 11% | 13% | 9% |
| Net Margins | 34% | 81% | 33% | 11% | 11% | 11% |
| Net Income (M) | $154 | $690 | $321 | $112 | $182 | $208 |
| Net Interest Expense (M) | $9 | n/a | $28 | $20 | $33 | $87 |
| Depreciation & Amort. (M) | $1 | $8 | $8 | $9 | $21 | $26 |
| Diluted Shares (M) | 312 | 313 | 309 | 322 | 325 | 321 |
| Earnings Per Share | $0.49 | $2.21 | $1.02 | $0.35 | $0.56 | $0.65 |
| EPS Growth | n/a | 351.02% | -53.85% | -65.69% | 60.0% | 16.07% |
| Avg. Price | $26.66 | $21.36 | $21.45 | $20.87 | $20.14 | $26.84 |
| P/E Ratio | 51.27 | 9.21 | 20.24 | 57.97 | 35.33 | 41.29 |
| Free Cash Flow (M) | $212 | $663 | $514 | $179 | $335 | $293 |
| CAPEX (M) | $5 | $64 | $13 | $30 | $28 | $40 |
| Current Ratio | 4.21 | 8.5 | 6.99 | 5.43 | 4.99 | 3.34 |
Exelixis has rapidly growing revenues and a flat capital expenditure trend, an excellent current ratio of 3.34, and positive EPS growth. However, the firm suffers from weak operating margins with a negative growth trend and positive cash flows.
