Celgene Corporation (NASDAQ: CELG) has rewarded shareholders for their optimism and patience with a run from the 2009 low of around $20 to the recent peak near $130.
Nothing grows straight up forever, though, and a little pullback in Celgene shares has taken place in recent days.
How much more of a pullback is warranted, though?
What The Bulls See
- Net profit margins of 26.07 percent that spin off over $2.06 billion in positive levered free cash flow annually
- Return on assets of 10.97 percent
- Return on equity of 33.02 percent
- $7.55 billion in cash versus total debt of $6.88 billion
- Current ratio of 4.6
- A reasonable PE of around 19 versus estimated revenue and earnings growth of 21.7 percent and 31.3 percent, respectively
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What The Bears See
- A debt-to-equity ratio of 105.37 percent
- A market capitalization of $95.01 billion that exceeds the market capitalization of $94.34 billion
- A price-to-sales ratio of 12.28
- A price-to-book ratio of 14.43
The Technical TakeTechnicians note that Celgene shares are declining after testing the upper edge of the intermediate-term uptrend channel at around $129 recently (the resistance created by that line would now come in at $132 – $133). They have come down off that resistance and successfully held initial horizontal line support at $113.67.
Should that level of support fail, the next test for Celgene would be the lower edge of the intermediate-term uptrend channel at around $104, which would also correspond with horizontal line support created by the November and December intra-month lows.
OverallCelgene is very pricey by some metrics and not so pricey based on P/E ratios. The company is great fundamentally, so any rich valuations may be well-deserved.
Any misstep by management, however, would be a trigger for significant selling pressure. Unless and until that happens, Celgene shares will likely be accumulated on dips to support.