Over the past six months, Regeneron’s shares (currently trading at $552.99) have posted a disappointing 18.9% loss, well below the S&P 500’s 4.5% gain. This was partly driven by its softer quarterly results and may have investors wondering how to approach the situation.

Is there a buying opportunity in Regeneron, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.

Why Is Regeneron Not Exciting?

Despite the more favorable entry price, we're cautious about Regeneron. Here are three reasons why REGN doesn't excite us and a stock we'd rather own.

1. Lackluster Revenue Growth

Long-term growth is the most important, but within healthcare, a stretched historical view may miss new innovations or demand cycles. Regeneron’s recent performance shows its demand has slowed as its annualized revenue growth of 6.7% over the last two years was below its five-year trend.

2. Shrinking Adjusted Operating Margin

Adjusted operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D. It also removes various one-time costs to paint a better picture of normalized profits.

Analyzing the trend in its profitability, Regeneron’s adjusted operating margin decreased by 12.3 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Its adjusted operating margin for the trailing 12 months was 35.8%.

3. New Investments Fail to Bear Fruit as ROIC Declines

ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Regeneron’s ROIC has decreased significantly over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Final Judgment

Regeneron’s business quality ultimately falls short of our standards. Following the recent decline, the stock trades at 13.7× forward P/E (or $552.99 per share). Beauty is in the eye of the beholder, but we don’t really see a big opportunity at the moment. We're fairly confident there are better stocks to buy right now. We’d recommend looking at an all-weather company that owns household favorite Taco Bell.

Stocks We Like More Than Regeneron

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