Illumina vs. Qiagen: Which Diagnostics & Research Stock is a Better Buy?

Illumina, Inc. (ILMN) and Qiagen N.V. (QGEN) are two prominent companies working in the diagnostics and research fields. ILMN is a sequencing and array-based technologies provider for genetic analysis, serving customers in the research, clinical, and applied markets. The company’s products are used for life sciences, oncology, reproductive health, agriculture, and other emerging segments. In comparison, Netherlands-based QGEN provides a sample to insight solutions that transform biological materials into valuable molecular insights worldwide. It provides its workflows to customers in Molecular Diagnostics, Applied Testing (forensics, veterinary testing, and food safety), pharmaceutical and biotechnology companies, and Academia (life sciences research).

The integration of new technologies and the rising need for advanced diagnostic devices and molecular testing to analyze the early development and progression of critical diseases have allowed the diagnostics and research industry to grow significantly lately. Rising investments in the industry make its long-term prospects bright. The clinical diagnostics market is expected to grow at a 6.1% CAGR to reach $93.85 billion by 2026. So, both QGEN and ILMN should benefit.

QGEN is a winner with 1.2% gains versus ILMN’s 19% loss over the past nine months. But which of these stocks is a better pick now? Let’s find out.

Latest Developments

On February 3, 2022, ILMN and Jean Perrin Center at the Clermont-Ferrand University Hospital in France announced an agreement to assess the clinical value of comprehensive genomic profiling (CGP) in cancer therapy options in patients with late-stage disease. The Jean Perrin Center will analyze biopsy samples from patients with advanced colorectal, breast, melanoma, or lung cancer using CGP enabled by ILMN’s TruSight Oncology 500 assay. Evidence from the CELIA research study will be used to support a precision medicine approach. With the growing usage of CGP in various cancer centers throughout Europe, this approach should enable companies to gain wider recognition in the industry.

On February 7, 2022, QGEN’s QuantiFERON tuberculosis (TB) testing solution, QuantiFERON-TB Gold Plus (QFT-Plus), received the approval of the fourth generation of this modern gold standard test in China and a new endorsement from the World Health Organization (WHO). The approval of the latest version of QFT-Plus in China strengthens the global coverage that QIAGEN can offer in the fight against TB.

Recent Financial Results

ILMN’s total revenue for its fiscal 2021 fourth quarter ended January 2, 2022, increased 25.7% year-over-year to $1.20 billion. The company’s gross profit came in at $857 million, indicating a 34.3% year-over-year improvement. Its operating profit came in at $146 million, marking a 26.6% decline from the prior-year period. ILMN’s non-GAAP net income came in at $117 million for the quarter, down 34.6% from the prior-year period. Its non-GAAP EPS decreased 38.5% year-over-year to $0.75. As of January 2, 2022, the company had $1.23 billion in cash and cash equivalents.

For its fiscal 2021 fourth quarter ended December 31, 2021, QGEN’s net sales increased 2% year-over-year to $582.40 million. The company’s adjusted gross profit came in at $393.70 million, representing a marginal decline from the year-ago period. Its adjusted operating income came in at $199.30 million, up 1.4% from the prior-year period. QGEN’s adjusted net income came in at $171 million, indicating a 7.2% year-over-year improvement. Its adjusted EPS increased 8.8% year-over-year at $0.74. The company had $880.52 million in cash and cash equivalents as of December 31, 2021.

Past and Expected Financial Performance

ILMN’s EBITDA and tangible book value have declined at CAGRs of 5.3% and 26.7%, respectively, over the past three years. The company’s net income has decreased at a CAGR of 2.7% over the past three years.

ILMN’s EPS is expected to decline 30% year-over-year in fiscal 2022, ending December 31, 2022, and 25.9% in fiscal 2023. Its revenue is expected to grow 16% year-over-year in fiscal 2022. Analysts expect the company’s EPS to rise at a 1% rate per annum over the next five years.

In comparison, QGEN’s EBITDA and tangible book value have increased at CAGRs of 23% and 32.1%, respectively, over the past three years. The company’s net income has grown at a CAGR of 39.1% over the past three years.

Analysts expect QGEN’s EPS to decline 23.1% from the prior-year period in fiscal 2022, ending December 31, 2022, and 8.9% in fiscal 2023. Its revenue is expected to decline 8.3% year-over-year in fiscal 2022 and 4.8% in fiscal 2023. The company’s EPS is expected to grow at a rate of 10.2% per annum over the next five years.

Valuation

In terms of forward EV/Sales, ILMN is currently trading at 9.66x, 68.9% higher than QGEN’s 5.72x. In terms of forward EV/EBITDA, QGEN’s 15.79x compares with ILMN’s 47.64x.

Profitability

ILMN’s trailing-12-month revenue is almost two times QGEN’s. However, QGEN is more profitable, with a 39.3% EBITDA margin versus ILMN’s 20%.

Furthermore, QGEN’s ROE, ROA, and ROTC of 17.4%, 6.9%, and 8.5% compare with ILMN’s 9.9%, 3.6%, and 4.1%, respectively.

POWR Ratings

While QGEN has an overall A grade, which translates to Strong Buy in our proprietary POWR Ratings system, ILMN has an overall C grade, equating to a Neutral. The POWR Ratings are calculated by considering 118 distinct factors, each weighted to an optimal degree.

QGEN has a B grade for Value, reflecting its lower-than-industry valuations. QGEN has a 5.33x forward Price/Sales, 2.7% lower than the 5.47x industry average. ILMN’s C grade for Value reflects its slightly higher-than-industry valuations ratios. ILMN’s 9.68x forward Price/Sales is 76.9% higher than the industry average of 5.47x.

Of the 56 stocks in the Medical - Diagnostics/Research industry, QGEN is ranked #1.

ILMN is ranked #78 of 440 stocks in the Biotech industry.

Beyond what we have stated above, our POWR Ratings system has also rated QGEN and ILMN for Stability, Sentiment, Growth, Quality, and Momentum. Get all QGEN ratings here. Also, click here to see the additional POWR Ratings for ILMN.

The Winner

Both QGEN and ILMN should benefit from the growing demand and investments in the diagnostics and research industry. However, higher profitability and lower valuation ratios make QGEN a better buy here.

Our research shows that the odds of success increase if one bets on stocks with an Overall POWR Rating of Buy or Strong Buy. Click here to access the top-rated stocks in the Medical - Diagnostics/Research industry, and here for those in the Biotech industry.

ILMN shares were trading at $328.46 per share on Friday afternoon, up $4.55 (+1.40%). Year-to-date, ILMN has declined -13.66%, versus a -7.95% rise in the benchmark S&P 500 index during the same period.

Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.

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