Cramer notes that Celgene could earn $16 as early as 2017. He recommends the stock because it is selling for cheaper than Pfizer (PFE - Get Report), Merck (MRK - Get Report), Bristol-Myers Squibb (BMY) and Eli Lilly (LLY - Get Report).
Cramer is also unsure about the claim that Bristol-Myers has a better hepatitis C pill than Gilead and recommends the latter stock as a buy. Finally, he suggests Isis Pharmaceuticals (ISIS - Get Report) and Seattle Genetics (SGEN - Get Report), the latter of which could have the largest drug pipeline outside of the big four pharma stocks. Cramer recommends buying Seattle Genetics on any weakness.
"We rate CELGENE CORP (CELG) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity, reasonable valuation levels, expanding profit margins and good cash flow from operations. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- CELG's revenue growth has slightly outpaced the industry average of 14.9%. Since the same quarter one year prior, revenues rose by 21.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Biotechnology industry and the overall market, CELGENE CORP's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- The gross profit margin for CELGENE CORP is currently very high, coming in at 96.51%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 12.21% trails the industry average.
- Net operating cash flow has increased to $550.70 million or 12.29% when compared to the same quarter last year. Despite an increase in cash flow of 12.29%, CELGENE CORP is still growing at a significantly lower rate than the industry average of 64.51%.
- You can view the full analysis from the report here: CELG Ratings Report
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