Seeking Alpha
, Small Cap Gems (527 clicks)
Long only, contrarian, special situations, value
Profile| Send Message|
( followers)  

The worldwide economy still remains iffy with Europe solidly in recession and unknowns abounding around the direction of Chinese economic growth. Hurricane Sandy should knock .5% off fourth quarter's GDP domestically as well. As such, I am looking to increase my exposure to the healthcare sector which is less dependent on economic growth. One stock I like here is Celgene (NASDAQ:CELG) which is historically cheap and has picked up some positive catalysts recently. It has run up some 20% since it lows in the second quarter, but it looks like there is further upside is ahead.

Key recent positives:

  • Consensus earnings estimates for both FY2012 and FY2013 have gone up over the last month
  • After slightly missing earnings estimates for the two previous quarters, the company has just beat estimates each of the last two quarters.
  • The company got a nice mention in this week's Barrons relating to an analyst at Wells Fargo Securities that is particularly bullish on the stock. This analyst believes the rollout of Revlimid (responsible for 2/3's of overall sales) to China and Brazil should boost sales substantially. He also mentions a "deep pipeline" of products in late testing phases as another catalyst.
  • Jim Cramer was also positive on the stock recently as well.

Celgene Corporation is a biopharmaceutical company that develops and commercializes various therapies to treat cancer and immune-inflammatory related diseases primarily in the United States and Europe

5 additional reasons CELG is a good growth play at under $73 a share:

  1. The stock sells for just over 13x forward earnings, a significant discount to its five year average (22.8).
  2. S&P has its strongest rating "Strong Buy" on the stock with a $93 price target on the stock. The median price target on CELG is $83 a share. The company has also more than doubled operating cash flow over that time span.
  3. Insiders are holding onto their shares and there has been some minor insider net purchases over the last six months.
  4. The stock is selling at the very bottom of its five year valuation range based on P/E, P/S, P/CF and P/B.
  5. The company has grown revenues at almost a 30% annual clip over the past five years. EPS has grown almost 40% on average during that time span. The stock has a five year projected PEG of under 1 (.67).
Source: This Cheap BioPharma Has Further Upside Ahead