Understanding Illumina’s Operational Performance

Operating expenses

Illumina (ILMN) incurred selling, general, and administrative expenses of $197.0 million in the third quarter of 2018 compared to $167.0 million in the third quarter of 2017.

This increase was attributable to higher performance-based compensation and expenses to support the growth of Illumina’s operations.

Understanding Illumina’s Operational Performance

Its research and development expenses also increased from $134.0 million in the third quarter of 2017 to $159.0 million in the third quarter of 2018 due to an increased head count. For 2018 and 2019, Illumina is expected to incur research and development expenses of $599.5 million and $680.6 million, respectively.

The company’s total operating expenses increased from $301.0 million in the third quarter of 2017 to $356.0 million in the third quarter of 2018. Illumina’s operating income increased from $181.0 million in the third quarter of 2017 to $241.0 million in the latest quarter.

Valuation metrics

Illumina’s EV (enterprise value) is $44.53 billion, and its EV-to-revenue ratio is 13.73. The stock is trading at a forward PE multiple of 52.40x. Its price-to-sales ratio is 15.13, and its price-to-book ratio is 14.03. In comparison, the price-to-book ratios of its peers Danaher (DHR), Thermo Fisher Scientific (TMO), and Waters Corporation (WAT) are 2.71, 3.70, and 8.25, respectively.

We’ll take a look at Illumina’s bottom line trend and price performance in the next article.