- The stock returned 58.36% in the past three months
- On a fundamental basis, strong sales and earnings growth has bolstered its strength
- Now guiding to overall revenue growth of 18-21%
Technically, the stock has been outpacing the broader market. On a fundamental basis, strong sales and earnings growth has bolstered its strength versus others in its medical-products industry.
The company develops and markets bioprocessing technologies utilized in the process of manufacturing biological drugs. It serves an international customer base, with the majority in North America.
The stock is forming a deep cup-with-handle pattern that it began in October, after pulling back from a high of $327.32. As with pretty much every other stock, Repligen shares fell hard on Tuesday but maintained support at their 50-day moving average.
What’s significant about 50-day support?
It shows that big institutional owners are not bailing out en masse. Back in the day, fund analysts and managers would eyeball stocks’ movements and swoop in to buy a stock they supported when it fell to a key moving average.Today, that function is performed more commonly by algorithmic trading, but the idea remains the same. It’s a good sign that big institutions have conviction in the stock, and aren’t panic selling as the market declines.
On the fundamental side, Repligen has increased earnings in each of the past three years, boasting a three-year growth rate of 63%. Revenue grew at a rate of 54% during that time.
That has translated into solid price appreciation. The stock returned 58.36% in the past three months as it advanced 31.38% in July and has tacked on more gains in August and September.Revamped Business Model
The company has shifted its business model in recent years, moving from a focus on therapeutics to now being a bioprocess products maker. In 2012, the company divested itself of therapeutic assets. The company has been growing both organically and through acquisition.
Analysts have a “buy” rating on the stock, according to MarketBeat data. The price target is $276, representing a 21.57% upside.
With a market capitalization of $12.58 billion, Repligen is categorized as a mid-cap. It’s included in the S&P 400 mid-cap index.
The stock zoomed 11.68% after the company reported earnings in early August. The nascent, post-earnings rally fizzled mid-August, along with the mid-cap index, and, for that matter, the large-cap S&P 500 as well. It’s true that stocks tend to move in tandem with the broader market, although it’s always a good idea to identify those that are holding up better, as is the case with Repligen.
In the most recent earnings report, the company beat analysts’ consensus views when it comes to sales and earnings, as you can see using MarketBeat earnings data. In fact, Repligen has a history of topping views going back to May 2019. That’s a great sign for investors thinking about taking a position in the stock.
However, the future potential is even more important. The company boosted its full-year sales forecast. It’s now anticipating revenue coming in between $790 million and $810 million, up from a range of $770 million to $800 million.Boosted Full-Year Guidance
In the second-quarter earnings release, the company said, “Our updated guidance reflects increased projected demand for our base business products, slightly offset by slower projected Covid-related revenue. We are now guiding to overall revenue growth of 18-21% as reported, 22%-25% at constant currency, and organic growth of 19%-22%”.
It added, “Our base business revenue, which excludes Covid-related revenue and inorganic acquisition revenue from 2021 acquisitions, is expected to grow by 31%-33%, an increase from our previous guidance of 24%-31%.”
In other words, even with declines from Covid-related product sales, which are slowing as vaccine rates drop, and acquisition revenue, the sales prospects look strong.
So is this stock a buy? Evaluate your risk tolerance, financial goals, and time horizon before you choose any stock. If you already have a number of biotechs or medical product makers in your portfolio, use caution when adding another stock from that industry.
But certainly, there are numerous bright spots, including the earnings history, the improved forward-looking guidance and the strength of the company’s existing core business.
