TSC Ratings' Updates: Celgene

The following ratings changes were generated on Monday, Nov. 3.

We've upgraded biopharmaceutical company Celgene(CELG Quote) from sell to hold. Strengths include its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and growth in earnings per share. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.

Revenue leaped by 67.7% over the same quarter one year prior, greatly exceeding the industry average of 17.3% and boosting EPS. Celgene has no debt to speak of, resulting in a debt-to-equity ratio of zero, a relatively favorable sign. The company also maintains a quick ratio of 6.08, which clearly demonstrates the ability to cover short-term cash needs. Celgene's gross profit margin is currently very high, coming in at 91.40%, but it has managed to decrease from the same period last year. The net profit margin of 23.30% trails the industry average.

Return on equity has greatly decreased from the same quarter one year prior, a signal of major weakness within the corporation. Celgene's return on equity significantly trails that of both the biotechnology industry average and the S&P 500. Celgene's share price has not changed very much over the past year, due to the relatively weak year-over-year performance of the overall market and the company's stagnant earnings. The fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.