The stock of Biomarin Pharmaceutical (NAS:BMRN, 30-year Financials) appears to be modestly undervalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $81.48 per share and the market cap of $14.9 billion, Biomarin Pharmaceutical stock shows every sign of being modestly undervalued. GF Value for Biomarin Pharmaceutical is shown in the chart below.
Because Biomarin Pharmaceutical is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth, which averaged 8.8% over the past three years and is estimated to grow 11.16% annually over the next three to five years.
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Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to to understand its financial strength. Biomarin Pharmaceutical has a cash-to-debt ratio of 0.98, which which ranks worse than 83% of the companies in Biotechnology industry. The overall financial strength of Biomarin Pharmaceutical is 6 out of 10, which indicates that the financial strength of Biomarin Pharmaceutical is fair. This is the debt and cash of Biomarin Pharmaceutical over the past years:
It is less risky to invest in profitable companies, especially those with consistent profitability over long term. A company with high profit margins is usually a safer investment than those with low profit margins. Biomarin Pharmaceutical has been profitable 1 over the past 10 years. Over the past twelve months, the company had a revenue of $1.9 billion and earnings of $4.41 a share. Its operating margin is -4.94%, which ranks better than 72% of the companies in Biotechnology industry. Overall, the profitability of Biomarin Pharmaceutical is ranked 3 out of 10, which indicates poor profitability. This is the revenue and net income of Biomarin Pharmaceutical over the past years:
One of the most important factors in the valuation of a company is growth. Long-term stock performance is closely correlated with growth according to GuruFocus research. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Biomarin Pharmaceutical is 8.8%, which ranks in the middle range of the companies in Biotechnology industry. The 3-year average EBITDA growth is -2.7%, which ranks in the middle range of the companies in Biotechnology industry.
Another way to look at the profitability of a company is to compare its return on invested capital and the weighted cost of capital. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. We want to have the return on invested capital higher than the weighted cost of capital. For the past 12 months, Biomarin Pharmaceutical's return on invested capital is 47.65, and its cost of capital is 2.07. The historical ROIC vs WACC comparison of Biomarin Pharmaceutical is shown below:
To conclude, the stock of Biomarin Pharmaceutical (NAS:BMRN, 30-year Financials) gives every indication of being modestly undervalued. The company's financial condition is fair and its profitability is poor. Its growth ranks in the middle range of the companies in Biotechnology industry. To learn more about Biomarin Pharmaceutical stock, you can check out its 30-year Financials here.
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