BUSINESS
Repligen Corporation develops and commercializes bioprocessing technologies and systems for use in biological drug manufacturing process in North America, Europe, the Asia Pacific, and internationally. It offers Protein A ligands that are the binding components of Protein A affinity chromatography resins; and cell culture growth factor products. The company’s chromatography products include OPUS pre-packed chromatography columns, which are used in the purification of biologics; and OPUS smaller-scale columns that are used in the high throughput process development screening, viral clearance validation studies, and scale down validation of chromatography processes. It also offers ELISA test kits; and chromatography resins under the CaptivA brand.
INVESTMENT RATING
Reflecting future returns on capital that are forecasted to be in line with the cost of capital, RGEN is expected to be Value Creation neutral.
Repligen has a current Value Trend Rating of D (Negative).
With this rating, PTR’s two proprietary measures of a stock’s current attractiveness are providing very contradictory signals. Repligen has a very low Appreciation Score of 8 but a slightly positive Power Rating of 65, and the Negative Value Trend Rating results.
Repligen’s stock is selling significantly above targeted value. The current stock price of $194.10 compares to targeted value 12 months forward of $74.
Repligen’s very low appreciation potential results in an appreciation score of 8 (92% of the universe has greater appreciation potential.)
Repligen has a Power Rating of 65. (This slightly positive Power Rating indicates that RGEN’s chances of achieving favorable investment performance over the near to intermediate term are only average.)
Contributing to this slightly positive Power Rating: recent price action has been favorable. Offsetting factors are the Biological Products, Excluding Diagnstics comparison group is currently in an unfavorable position; and the trend in RGEN’s earnings estimates has been unfavorable in recent months.
INVESTMENT PROFILE
Repligen’s financial strength is exceptional. Financial strength rating is 95.
Relative to the S&P 500 Composite, Repligen Corp has both Growth and Value characteristics; its appeal is likely to be to Capital Gain-oriented investors; the perception is that RGEN is lower risk. Relative weaknesses include: low forecasted profitability, and low historical profitability. Repligen’s valuation is high: low dividend yield, high P/E ratio, and moderate price/book ratio. RGEN has unusually low market capitalization.
CURRENT SIGNALS
Repligen’s current operations are eroding. Return on equity is falling, reflecting: falling asset utilization; declining pretax margin; and falling leverage.
Repligen’s current technical position is very strong. The stock price is in a 3.7 month up move. The stock has appreciated 74.3% from its prior low. The stock price is above its 200 day moving average which is in an uptrend.
ALERTS
. Positive development: positive upside/downside volume developed. Negative development: the stock fell on very heavy volume.
Positive development: significant quarterly earnings acceleration occurred. Negative development: significant quarterly sales deceleration occurred.
In light of this new information we are reviewing our current Overall Rating of D. This review will be completed in the next several days.
Repligen Corp (NASDAQ: RGEN) has reported E.P.S. of $-0.46 for its fourth fiscal quarter (ending December 31) versus $0.88 for the same period a year ago. For the latest four quarters through December 31, E.P.S. were $0.75 compared to $3.35 a year ago.
On 2/21/24, Repligen Corp (NASDAQ: RGEN) stock declined by -2.8%, closing at $194.10. Moreover, this decline was accompanied by exceptionally high trading volume at 203% of normal. Relative to the market the stock has been strong over the last nine months but has declined -5.6% during the last week.
CASH FLOW
In 2022, Repligen generated an increase in cash of +$19.9 million (+3%). Sources of cash were very slightly larger than uses. Cash generated from 2022 EBITDA totaled +$256.2 million. Non-operating sources contributed +$16.9 million (+7% of EBITDA). Cash taxes consumed -$43.7 million (-17% of EBITDA). Re-investment in the business amounted to -$238.1 million (-93% of EBITDA). On a net basis, debt investors supplied +$53.9 million (+21% of EBITDA) while equity investors pulled out -$25.3 million (-10% of EBITDA).
Repligen’s Non-operating Income, %EBITDA has exhibited a volatile overall uptrend over the period. This improvement was accompanied by stability for the Repligen Peer Group. In most years, Repligen was in the lower quartile and third quartile. Currently, Repligen is upper quartile at +7% of EBITDA (+$16.9 million).
Repligen’s Cash Taxes, %EBITDA has exhibited little to no overall change over the period. This stability was accompanied by an uptrend for the Repligen Peer Group. (Since 2019 Cash Taxes, %EBITDA has experienced a very sharp decline.) In most years, Repligen was in the top quartile and second quartile. Currently, Repligen is substantially below median at -17% of EBITDA (-$43.7 million).
Repligen’s Business Re-investment, %EBITDA has suffered a volatile overall downtrend over the period. This downtrend was accompanied by a similar trend for the Repligen Peer Group. (Since 2019 Business Re-investment, %EBITDA has experienced a very sharp recovery.) In most years, Repligen was in the lower quartile and top quartile. Currently, Repligen is substantially below median at -93% of EBITDA (-$238.1 million).
Repligen’s Debt Investors, %EBITDA has exhibited little to no overall change over the period. This stability was accompanied by an uptrend for the Repligen Peer Group. In most years, Repligen was in the top quartile and third quartile. Currently, Repligen is at the upper quartile at +21% of EBITDA (+$53.9 million).
Repligen’s Equity Investors, %EBITDA has enjoyed a volatile overall uptrend over the period. This improvement was accompanied by a similar trend for the Repligen Peer Group. (Since 2019 Equity Investors, %EBITDA has experienced a very sharp decline.) In most years, Repligen was in the top quartile and second quartile. Currently, Repligen is slightly above median at -10% of EBITDA (-$25.3 million).
Repligen’s Change in Cash, %EBITDA has exhibited a volatile overall uptrend over the period. This improvement was accompanied by stability for the Repligen Peer Group. In most years, Repligen was in the top quartile and second quartile. Currently, Repligen is at median at +8% of EBITDA (+$19.9 million).
Repligen’s Cash, %Revenue has enjoyed a volatile overall uptrend over the period. This improvement was accompanied by an opposite trend for the Repligen Peer Group. (Since 2019 Cash, %Revenue has experienced a very sharp decline.) In most years, Repligen was in the top quartile. Currently, Repligen is at median at +78%.
PROFITABILITY
Repligen’s return on equity has eroded very significantly since 2013. The current level of 5.8% is 1.21X the low for the period and is -62.4% from the high.
This very significant erosion was due to very strong negative trend in pretax operating return and small positive trend in non-operating factors.
The productivity of Repligen’s assets declined over the full period 2013-2023: asset turnover has suffered a very strong overall downtrend although it experienced a very sharp recovery after the 2020 low.
Repligen’s pretax margin has exhibited a volatile overall uptrend over the period 2013-2023.
Non-operating factors (income taxes and financial leverage) had a minor positive influence on return on equity.
Repligen’s return on equity is at median (5.8%) for the four quarters ended September, 2023.
Operating performance (pretax return on assets) is at the upper quartile (5.0%) reflecting asset turnover that is lower quartile (0.27X) and upper quartile pretax margin (18.8%).
Tax “keep” rate (income tax management) is above median (92.0%) resulting in after tax return on assets that is upper quartile.
Financial leverage (leverage) is at the lower quartile (1.26X).
GROWTH RATES
There are no significant differences between Repligen’s longer term growth and growth in recent years.
Repligen’s historical income statement growth has been lower than balance sheet growth. Revenue growth has fallen short of asset growth; earnings growth has fallen short of equity growth.
Annual revenue growth has been 23.7% per year.
Total asset growth has been 34.2% per year.
Annual E.P.S. growth has been 25.2% per year.
Equity growth has been 33.2% per year.
Repligen’s consensus growth rate forecast (average of Wall Street analysts) is 19.9% — substantially below the average of the historical growth measures.
Relative to the Repligen Peer Group, Repligen’s historical growth measures are consistently top quartile. Revenue growth (23.7%) has been upper quartile. Total asset growth (34.2%) has been upper quartile. E.P.S. growth (25.2%) has been upper quartile. Equity growth (33.2%) has been upper quartile.
In contrast, consensus growth forecast (19.9%) is at median.
PRICE HISTORY
Over the full time period, Repligen’s stock price performance has been variable and exceptional. Between April, 2013 and February, 2024, Repligen’s stock price rose +2066%; relative to the market, this was a +595% gain. Significant price moves during the period: 1) September, 2019 – October, 2021: +279%; and 2) December, 2014 – June, 2015: +108%.
TOTAL INVESTMENT RETURNS
Current annual total return performance of 2.2% is slightly below median relative to the S&P 500 Composite.
In addition to being slightly below median relative to S&P 500 Composite, current annual total return performance through January, 2024 of 2.2% is at the lower quartile relative to Repligen Corp Peer Group.
Current 5-year total return performance of 27.1% is upper quartile relative to the S&P 500 Composite.
Through January, 2024, with upper quartile current 5-year total return of 27.1% relative to S&P 500 Composite, Repligen’s total return performance is upper quartile relative to Repligen Corp Peer Group.
VALUATION BENCHMARKS
Relative to S&P 500 Composite, RGEN’s overall valuation is quite high. Four of five factors are upper quartile. The highest factor is the ratio of enterprise value/earnings before interest and taxes, followed by the ratio of enterprise value/revenue, then by the price/earnings ratio, then by the ratio of enterprise value/assets. The lowest factor, price/equity ratio, is above median.
Relative to Repligen Peer Group, RGEN’s overall valuation is exceptionally high. All five factors are upper quartile. The highest factor is the ratio of enterprise value/revenue, followed by the ratio of enterprise value/earnings before interest and taxes, then by the ratio of enterprise value/assets, then by the price/equity ratio. The lowest factor is the price/earnings ratio.
Repligen has a major value gap compared to the median valuation. For RGEN to achieve median valuation, its current ratio of enterprise value/revenue would have to fall from the current level of 16.81X to 4.21X. If RGEN’s ratio of enterprise value/revenue were to fall to 4.21X, its stock price would be lower by $-151 to $43.
For RGEN to fall to lower quartile valuation relative to the Repligen Peer Group, its current ratio of enterprise value/revenue would have to fall from the current level of 16.81X to 2.64X. If RGEN’s ratio of enterprise value/revenue were to fall to 2.64X, its stock price would decline by $-170 from the current level of $194.
VALUE TARGETS
Reflecting future returns on capital that are forecasted to be in line with the cost of capital, RGEN is expected to be Value Creation neutral.
Repligen’s current Price Target of $72 represents a -63% change from the current price of $194.10.
Repligen’s very low appreciation potential results in an appreciation score of 8 (92% of the universe has greater appreciation potential.)
Notwithstanding this low Appreciation Score of 8, the moderately high Power Rating of 65 results in an Value Trend Rating of D.
Repligen’s current Price Target is $72 (-22% from the 2022 Target of $93 and -63% from the 02/21/24 price of $194.10). This fall in the Target is the result of a +6% increase in the equity base and a -27% decrease in the price/equity multiple. The forecasted decline in return on equity has a very large negative impact on the price/equity multiple and the forecasted decline in growth has a very large negative impact as well. Partially offsetting these Drivers, the forecasted decline in cost of equity has a very large positive impact.
PTR’s return on equity forecast is 4.7% — slightly below our recent forecasts. Forecasted return on equity exhibited a modest, erratic decline between 2014 and 2022. The current forecast is below the 2015 peak of 9%.
PTR’s growth forecast is 19.0% — significantly below our recent forecasts. Forecasted growth enjoyed a dramatic, variable increase between 2014 and 2022. The current forecast is well above the 2015 low of 13%.
PTR’s cost of equity forecast is 3.9% — slightly below recent levels. Forecasted cost of equity exhibited a slight, erratic increase between 2014 and 2022. The current forecast is below the 2016 peak of 7.2%.
At Repligen’s current price of $194.10, investors are placing a positive value of $139 on its future investments. This view is consistent with the company’s most recent performance that reflected a growth rate of 34.0% per year, and a return on equity of 7.2% versus a cost of equity of 5.8%.
PTR’s 2024 Price Target of $72 is based on these forecasts and reflects an estimated value of existing assets of $115 and a value of future investments of $-43.
Be the first to comment