How Incyte’s Valuation Has Changed since 1Q17 Results



Incyte’s valuation

Incyte is a Delaware-based biopharmaceutical company focused on developing and commercializing oncology products to cater to unmet medical needs.

The company reported revenues of $384.1 million during 1Q17 as compared to $263.5 million during 1Q16.

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Forward PE

PE multiples represent what one share can buy for an equity investor. Incyte’s PE multiples are high compared to peers in the biotechnology industry.

As of June 13, 2017, Incyte (INCY) was trading at a forward PE multiple of 261.3x as compared to the industry average of ~14.7x. The company is trading at a much higher PE as compared to its peers including Vertex Pharmaceuticals (VRTX), Regeneron Pharmaceuticals (REGN), and Alexion Pharmaceuticals (ALXN), which are trading at a PE of 48.2x, 33.4x, and 18.2x, respectively.

Forward EV to EBITDA

On a capital-structure-neutral and excess-cash-adjusted basis, Incyte currently trades at ~510.7x, which is much higher than the industry average of ~10.0x. Its competitors such as Vertex Pharmaceuticals, Regeneron Pharmaceuticals, and Alexion Pharmaceuticals are trading at forward EV-to-EBITDA multiples of 38.3x, 19.2x, and 14.7x, respectively.

Analyst recommendations

As per the data on June 13, 2017, Incyte’s stock value has risen ~44.8% over the last 12 months. Wall Street analysts estimate that the stock has the potential to return ~26% over the next 12 months. Analysts’ recommendations show a 12-month targeted price of $147.33 per share compared to the last price of $116.44 per share as of June 12, 2017. Also, out of the 20 analysts tracking Incyte, 16 of them have recommended a “buy,” while four analysts recommend a “hold.” The consensus rating for Incyte’s stock is 1.9, which is a “moderate buy” for momentum investors as well as long-term investors.

To divest the risk, investors can consider ETFs like the PowerShares Dynamic Biotechnology (PBE), which holds ~5.1% of its total assets in Incyte.


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