Incyte’s 29% return over the past six months has outpaced the S&P 500 by 15.7%, and its stock price has climbed to $119.95 per share. This was partly thanks to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is it too late to buy INCY? Find out in our full research report, it’s free.
Why Are We Positive on Incyte?
Founded in 1991 and evolving from a genomics research firm to a commercial-stage drug developer, Incyte (NASDAQ: INCY) is a biopharmaceutical company that discovers, develops, and commercializes proprietary therapeutics for cancer and inflammatory diseases.
1. Skyrocketing Revenue Shows Strong Momentum
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Incyte grew its sales at an impressive 16.7% compounded annual growth rate. Its growth beat the average healthcare company and shows its offerings resonate with customers.
2. Increasing Free Cash Flow Margin Juices Financials
Free cash flow isn’t a prominently featured metric in company financials and earnings releases, but we think it’s telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
As you can see below, Incyte’s margin expanded by 12.6 percentage points over the last five years. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability. Incyte’s free cash flow margin for the trailing 12 months was 32.7%.
3. New Investments Bear Fruit as ROIC Jumps
We like to invest in businesses with high returns, but the trend in a company’s ROIC can also be an early indicator of future business quality.
Fortunately, Incyte’s ROIC has increased significantly over the last few years. This is a great sign when paired with its already strong returns. It could suggest its competitive advantage or profitable growth opportunities are expanding.
Final Judgment
These are just a few reasons why we’re bullish on Incyte, and with its shares beating the market recently, the stock trades at 52.3× forward P/E (or $119.95 per share). Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
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