Unveiling Incyte (INCY)'s Value: Is It Really Priced Right? A Comprehensive Guide
Incyte Corp (NASDAQ:INCY) experienced a daily loss of -5.12% and a 3-month loss of -5.84%, with an Earnings Per Share (EPS) of 1.63. This raises the question is the stock significantly undervalued? This article presents a comprehensive valuation analysis of Incyte, encouraging readers to delve into the details to uncover the intrinsic value of the stock.
Company Introduction
Incyte Corp focuses on the discovery and development of small-molecule drugs. Their lead drug, Jakafi, treats two types of rare blood cancer and graft versus host disease. Incyte's other marketed drugs include rheumatoid arthritis treatment Olumiant, and oncology drugs Iclusig, Pemazyre, Tabrecta, and Monjuvi. The firm's first dermatology product, Opzelura, was approved in 2021 for atopic dermatitis and 2022 for vitiligo. Comparing the stock price of $59.35 to the GF Value of $89.6, it appears that Incyte's stock may be significantly undervalued.
Understanding GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. It provides a fair value at which the stock should ideally be traded. If the stock price 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.
Based on our analysis, Incyte (NASDAQ:INCY) appears to be significantly undervalued. The stock's future return is likely to be much higher than its business growth due to its undervaluation.
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Financial Strength
Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Thus, it is important to carefully review the financial strength of a company before deciding whether to buy its stock. Incyte has a cash-to-debt ratio of 86.14, which is better than 75.23% of companies in the Biotechnology industry. GuruFocus ranks the overall financial strength of Incyte at 10 out of 10, indicating strong financial health.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is generally less risky. Incyte has been profitable 6 over the past 10 years. It had a revenue of $3.50 billion and Earnings Per Share (EPS) of $1.63 over the past twelve months. Its operating margin is 12.64%, ranking better than 84.55% of companies in the Biotechnology industry. Overall, the profitability of Incyte is ranked 7 out of 10, indicating fair profitability.
Growth is a crucial factor in the valuation of a company. Incyte's 3-year average revenue growth rate is better than 61.12% of companies in the Biotechnology industry. However, Incyte's 3-year average EBITDA growth rate is 2.4%, ranking worse than 53.25% of companies in the Biotechnology industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can also evaluate its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. Incyte's ROIC is 13.18 while its WACC is 7.63.
Conclusion
In conclusion, Incyte (NASDAQ:INCY) stock appears to be significantly undervalued. The company's financial condition is strong, and its profitability is fair. Its growth ranks worse than 53.25% of 1260 companies in the Biotechnology industry. To learn more about Incyte stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
