Celgene to Rise Like a Phoenix: Opinion
NEW YORK (TheStreet) -- It's time for Celgene's
(CELG) share price to reverse a year-to-date down trend.
Shares have tanked over 13% since January as of the Tuesday close of $146.64 on nothing more than hot air: Momentum traders rotating out of high-growth biotech names.
The company reports first-quarter earnings before the open on Thursday. If results meet expectations, investors should look for it to mark the end of a bad run for a good stock. The shares are too cheap.
Jim Cramer and Stephanie Link purchased more shares of Celgene on Tuesday for their Action Alerts PLUS portfolio. They share the risks and reasons behind the buy here.
Growth investors will like Celgene for its sky-high forward growth. Value investors can move in as the forward price-to-earnings and PEG ratios signal a bargain's at hand. The charts indicate a bottom is nigh.
Celgene is a dyed-in-the-wool growth story. The five-year consensus EPS growth is pegged at 26%. While that's a pretty stout number, the estimates do not appear to be overly aggressive. The company has a distinguished track record of outstanding earning growth.
Management's confidence in the franchise remains upbeat, and Celgene's pipeline is deep and strong. Over the past 16 quarters, the company has not missed any Street estimate forecasts. None. Management has beat Wall Street consensus quarterly estimates three times over that period, during which overall operating earnings have grown by around 30% a year. Here's a presentation from Cowen's annual health care conference in March, where management outlined sales and earnings expectations through 2017.
The Value Story
CELG shares are cheap and the value investment crowd is watching. The current operating P/E is about 24 times. Based upon management's 2015 projected earnings per share, the forward multiple is only 15 times. The two-year PEG ratio is 0.9; anything below 1.0 typically spells discount.