We've been asking ourselves recently if the market has placed a fair valuation on Elanco Animal Health. 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.
a Lower P/B Ratio Than Its Sector Average but Trading Above Its Fair Price:
Elanco Animal Health Incorporated, an animal health company, innovates, develops, manufactures, and markets products for pets and farm animals worldwide. The company belongs to the Health Care sector, which has an average price to earnings (P/E) ratio of 22.94 and an average price to book (P/B) ratio of 3.19. In contrast, Elanco Animal Health has a trailing 12 month P/E ratio of 20.2 and a P/B ratio of 1.3.
Elanco Animal Health has moved 20.6% over the last year compared to 15.2% for the S&P 500 — a difference of 5.3%. Elanco Animal Health has a 52 week high of $18.09 and a 52 week low of $8.02.
The Firm Has a Highly Leveraged Balance Sheet:
| 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $3,071 | $3,271 | $4,764 | $4,411 | $4,417 | $4,439 |
| Operating Margins | 3% | -21% | -12% | -2% | -27% | 11% |
| Net Margins | 2% | -18% | -10% | -2% | -28% | 8% |
| Net Income (M) | $68 | -$574 | -$483 | -$78 | -$1,231 | $338 |
| Net Interest Expense (M) | $79 | $150 | $236 | $241 | $277 | $296 |
| Depreciation & Amort. (M) | $314 | $517 | $716 | $682 | $694 | $73 |
| Diluted Shares (M) | 370 | 441 | 487 | 488 | 492 | 497 |
| Earnings Per Share | $0.18 | -$1.3 | -$0.99 | -$0.16 | -$2.5 | $0.68 |
| EPS Growth | n/a | -822.22% | 23.85% | 83.84% | -1462.5% | 127.2% |
| Avg. Price | $30.08 | $26.34 | $32.11 | $24.97 | $14.9 | $17.7 |
| P/E Ratio | 167.11 | -20.26 | -32.43 | -156.06 | -5.96 | 26.03 |
| Free Cash Flow (M) | $84 | -$160 | $324 | $281 | $131 | $394 |
| CAPEX (M) | $140 | $119 | $159 | $171 | $140 | $147 |
| EV / EBITDA | 33.28 | -104.27 | 145.77 | 29.01 | -25.52 | 22.5 |
| Total Debt (M) | $2,380 | $6,682 | $6,613 | $6,224 | $5,812 | $4,365 |
| Net Debt / EBITDA | 5.22 | -38.67 | 41.21 | 9.64 | -10.9 | 6.95 |
| Current Ratio | 2.9 | 1.65 | 1.99 | 1.93 | 2.75 | 2.44 |
Elanco Animal Health has generally positive cash flows and an excellent current ratio of 2.44. Additionally, the company's financial statements display growing revenues and a flat capital expenditure trend and a strong EPS growth trend. However, the firm has a highly leveraged balance sheet. Finally, we note that Elanco Animal Health has weak operating margins with a positive growth rate.
