Regeneron Pharmaceuticals Inc (REGN) has been one of the best performing stocks in the market since the 2009 lows. The stock has returned 40% a year over the last 10 years and 20% over the last 15 years.
During the recent market turmoil, biotech was one of the sectors that was most affected. REGN fell some 40% off its all time highs. And at one point the stock was down some 35% for 2016, which matched the worst single year decline on record since 2008.
But this isn’t 2008, so it’s possible that this type of price action created a value proposition to new investors. The chart above shows the support zone between $350 and $375, which is the 38% retrace of the entire rally since 2009, and a prior pivotal swing high as well.
Here is a closer look at the support zone. So far it has held and looks poised to retrace back up around $500. Whether the stock makes new all time highs again in the near future is anyone’s guess but the answer may lie in how the entire biotech sector withstands the current election year.
Since the February lows the biotech sector has slightly outperformed the S&P 500. There is a lot of concern with the potential upcoming legislation and regulation in drug pricing for these biotech names. Also many of these biotech names have had tremendous runs up in the stock price, leaving them vulnerable to profit taking and volatility at above average valuations.
However this recent sell off may have been exactly what was needed to clear the way for the next rally upwards. According to Morningstar’s valuation metrics, the company is trading below it’s 5 year average in P/E, P/B, P/S, and P/CF with a forward P/E of 23.8. Not exactly cheap but not ridiculous either.
The company has been able to grow revenues (up 45% in 2015) and EPS in 2015.
With a debt to equity ratio of 0.10 and ROA, ROE, ROIC consistently in the double digits throughout the years, this still appears to be a solid company. While the stock may not be able to produce as good of results as it has been accustomed to, I see no reason investors can’t continue to see some extra alpha going forward.