The past six months have been a windfall for Biogen’s shareholders. The company’s stock price has jumped 41.7%, setting a new 52-week high of $188.65 per share. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is there a buying opportunity in Biogen, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Is Biogen Not Exciting?
We’re glad investors have benefited from the price increase, but we don't have much confidence in Biogen. Here are three reasons we avoid BIIB and a stock we'd rather own.
1. Revenue Spiraling Downwards
Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Biogen struggled to consistently generate demand over the last five years as its sales dropped at a 6.7% annual rate. This was below our standards and is a sign of lacking business quality.
2. Revenue Projections Show Stormy Skies Ahead
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Biogen’s revenue to drop by 9.3%, a decrease from its 6.7% annualized declines for the past five years. This projection is underwhelming and suggests its products and services will face some demand challenges.
3. EPS Trending Down
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Sadly for Biogen, its EPS declined by 13.2% annually over the last five years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.
Final Judgment
Biogen isn’t a terrible business, but it doesn’t pass our quality test. Following the recent rally, the stock trades at 14.4× forward P/E (or $188.65 per share). While this valuation is fair, the upside isn’t great compared to the potential downside. We're pretty confident there are more exciting stocks to buy at the moment. We’d suggest looking at one of our top digital advertising picks.
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