Biogen has followed the market’s trajectory closely, rising in tandem with the S&P 500 over the past six months. The stock has climbed by 26.6% to $146 per share while the index has gained 26.5%.
Is there a buying opportunity in Biogen, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free for active Edge members.
Why Is Biogen Not Exciting?
We don't have much confidence in Biogen. Here are three reasons there are better opportunities than BIIB and a stock we'd rather own.
1. Revenue Spiraling Downwards
A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years. Biogen struggled to consistently generate demand over the last five years as its sales dropped at a 6.5% annual rate. This wasn’t a great result and signals it’s a lower quality business.
2. Revenue Projections Show Stormy Skies Ahead
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Biogen’s revenue to drop by 6.8%, a decrease from its 6.5% annualized declines for the past five years. This projection doesn't excite us and indicates its products and services will face some demand challenges.
3. EPS Trending Down
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Sadly for Biogen, its EPS declined by 15.7% annually over the last five years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.
Final Judgment
Biogen isn’t a terrible business, but it isn’t one of our picks. That said, the stock currently trades at 9.4× forward P/E (or $146 per share). While this valuation is optically cheap, the potential downside is big given its shaky fundamentals. We're pretty confident there are superior stocks to buy right now. Let us point you toward one of our top software and edge computing picks.
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