The stock of Biomarin Pharmaceutical (NAS:BMRN, 30-year Financials) gives every indication of being 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 $81.9 per share and the market cap of $15 billion, Biomarin Pharmaceutical stock is estimated to be 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 8.92% annually over the next three to five years.
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It is always important to check the financial strength of a company before buying its stock. Investing in companies with poor financial strength have a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage is a great way to understand the financial strength of a company. Biomarin Pharmaceutical has a cash-to-debt ratio of 1.00, which is 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:
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Biomarin Pharmaceutical has been profitable 1 over the past 10 years. Over the past twelve months, the company had a revenue of $1.8 billion and earnings of $4.06 a share. Its operating margin is -5.95%, 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:
Growth is probably one of the most important factors in the valuation of a company. GuruFocus’ research has found that growth is closely correlated with the long-term performance of a company’s stock. If a company’s business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Likewise, if a company's revenue and earnings are declining, the value of the company will decrease. Biomarin Pharmaceutical’s 3-year average revenue growth rate is in the middle range of the companies in Biotechnology industry. Biomarin Pharmaceutical’s 3-year average EBITDA growth rate is -2.7%, which ranks in the middle range of the companies in Biotechnology industry.
One can also evaluate a company’s profitability by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). 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. If the return on invested capital exceeds the weighted average cost of capital, the company is likely creating value for its shareholders. During the past 12 months, Biomarin Pharmaceutical’s ROIC is 17.77 while its WACC came in at 1.94. The historical ROIC vs WACC comparison of Biomarin Pharmaceutical is shown below:
In summary, Biomarin Pharmaceutical (NAS:BMRN, 30-year Financials) stock is estimated to be 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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