Emergent BioSolutions Incorporated Stock Downgraded (EBS)

NEW YORK ( TheStreet) -- Emergent BioSolutions Incorporated (NYSE: EBS) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and compelling growth in net income. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

Highlights from the ratings report include:
  • EBS's very impressive revenue growth greatly exceeded the industry average of 5.5%. Since the same quarter one year prior, revenues leaped by 171.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • EBS's debt-to-equity ratio is very low at 0.15 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 4.97, which clearly demonstrates the ability to cover short-term cash needs.
  • 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, EMERGENT BIOSOLUTIONS INC's return on equity has significantly outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • EMERGENT BIOSOLUTIONS INC reported significant earnings per share improvement in the most recent quarter compared to 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, EMERGENT BIOSOLUTIONS INC reported lower earnings of $0.60 versus $1.56 in the prior year. This year, the market expects an improvement in earnings ($0.66 versus $0.60).
  • EBS's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 37.14%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Turning toward the future, 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.
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Emergent BioSolutions, Inc., a biopharmaceutical company, engages in the development, manufacture, and commercialization of vaccines and therapeutics for use in defense and commercial markets to healthcare providers and purchasers in the United States and internationally. The company has a P/E ratio of 13.4, below the average drugs industry P/E ratio of 22.4 and below the S&P 500 P/E ratio of 17.7. Emergent BioSolutions has a market cap of $517.7 million and is part of the health care sector and drugs industry. Shares are down 14.1% year to date as of the close of trading on Tuesday.

You can view the full Emergent BioSolutions Ratings Report or get investment ideas from our investment research center.
-- Written by a member of TheStreet Ratings Staff
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