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Genzyme (GENZ) is having a GREAT day in the market trading at $50.06 as I write, up $5.56 or 12.49% on the day. I do not own any shares or have any other positions in this stock. According to the Yahoo "Profile", GENZ "...is a global biotechnology company with a product portfolio focused on genetic disorders, renal disease, osteoarthritis and organ transplant."
What drove the stock higher today was a 2nd quarter 2004 earnings report. Revenue for the quarter rose to $549.6 million from $347.7 million the year earlier. Net profit came in at $78.2 million or $.34/share compared with $70.8 million or $.32/share the prior year. In addition, the company raised revenue estimates for the full year and maintained full year earnings estimates of $1.65 - $1.75/share.
If we look longer term at a "5-Yr Restated" financials statement from Morningstar.com, we can see that revenue has steadily grown from $772 million in 1999 to $1.8 billion in the trailing twelve months (TTM). Earnings, however, have been relatively flat during this period, with $.85/share reported in 1999, and $.43/share in the trailing twelve months. The current estimates (see above) of $1.65 to $1.75 would represent a significant improvement in the earnings picture.
Free cash flow, while variable recently, with $40 million in 2001, dropping to $(3) million in 2002, has improved significantly to $128 million in 2003, and $155 million in the TTM.
Morningstar reports that GENZ has $777.6 million in cash and $907.3 million in other current assets. This is plenty to cover the current liabilities of $923.0 million AND to make a nice dent in the $1.08 billion in long-term liabilities.
What about valuation? Looking at "Key Statistics" from Yahoo, we can see that the Market Cap is a large $11.42 Billion. NO trailing p/e is reported but the forward p/e (fye 31-Dec-05) is a moderate 24.98 with a PEG of 1.60. A little rich but not bad imho.
Yahoo reports 226.52 million shares outstanding with 199.6 million of them that float. There are a LOT of shares out short, with 10.73 million of them reported short as of 6/7/04. This represents 5.38% of the float or 4.624 trading days. If we use 3 days as a cut-off...there is a bit of a risk of a squeeze to watch for.
No cash dividend is paid, and the last stock split was a 2:1 in June, 2001.
What about technicals? Taking a look at a point & figure chart from Stockcharts.com:
we can see that the stock has been moving higher since it broke through a resistance level in December, 2002. However, the chart DID break down in March, 2004, when it fell below $49 at a support level. Whether the stock continues to move higher from its current level is a wait and see. Would like to see this stock close above $52...to demonstrate the upward move is back on track...but then again, I am NOT a technician...so call it like you see it!
Overall, the stock is an interesting pick. The valuation is not perfect....the recent news is compelling with a great earnings report and estimates, the track record on earnings growth is less than perfect, and the technical aspects could be better. The balance sheet and free cash flow are solid however. I just SOLD a stock at a loss today...so I am NOT in the market for a new stock.
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