Celgene (CELG) Stock Showing Signs of a Downtrend

Our indicators are pointing to lower prices for Celgene (CELG).
By Bruce Kamich ,

NEW YORK (TheStreet) -- Celgene Corp. (CELG) - Get Report has largely been stuck in a $110 to $130 trading range the past 12 months, but its internal strength has been weakening and a downside move could be coming.

We can see some other features in this chart of CELG, above. In addition to the trading range, the On-Balance-Volume (OBV) line peaked in late June. For the past three months, CELG has been crisscrossing the 50-day and 200-day moving averages, but it is now below both of them and heading to the bottom of the trading range.

This chart, above, shows CELG below its flat 40-week moving average and that the Moving Average Convergence Divergence (MACD) oscillator peaked back in February. Our indicators are pointing to lower prices for CELG.

TheStreet Ratings team rates CELGENE CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

We rate CELGENE CORP (CELG) a BUY. This is driven by multiple 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, expanding profit margins and solid stock price performance. We feel its 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 11.3%. Since the same quarter one year prior, revenues rose by 17.8%. 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.
  • CELGENE CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CELGENE CORP increased its bottom line by earning $2.40 versus $1.69 in the prior year. This year, the market expects an improvement in earnings ($4.81 versus $2.40).
  • The gross profit margin for CELGENE CORP is currently very high, coming in at 92.57%. Regardless of CELG's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CELG's net profit margin of -1.46% significantly underperformed when compared to the industry average.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • You can view the full analysis from the report here: CELG

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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