Over the past six months, Repligen has been a great trade, beating the S&P 500 by 18.1%. Its stock price has climbed to $168.43, representing a healthy 31.7% increase. This was partly thanks to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is now the time to buy Repligen, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Do We Think Repligen Will Underperform?
Despite the momentum, we don’t have much confidence in Repligen. Here are three reasons we avoid RGEN, plus one stock we’d rather own.
1. Shrinking Adjusted Operating Margin
Adjusted operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D. It also removes various one-time costs to paint a better picture of normalized profits.
Looking at the trend in its profitability, Repligen’s adjusted operating margin decreased by 16.2 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Its adjusted operating margin for the trailing 12 months was 15.3%.
2. EPS Trending Down
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Sadly for Repligen, its EPS declined by 3.8% annually over the last five years while its revenue grew by 9.1%. This tells us the company became less profitable on a per-share basis as it expanded.
3. New Investments Fail to Bear Fruit as ROIC Declines
ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
Over the last few years, Repligen’s ROIC has unfortunately decreased significantly. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.
Final Judgment
Repligen falls short of our quality standards. With its shares beating the market recently, the stock trades at 73.8× forward P/E (or $168.43 per share). This multiple tells us a lot of good news is priced in - we think other companies feature superior fundamentals at the moment. We’d recommend looking at the Amazon and PayPal of Latin America.
Stocks We Would Buy Instead of Repligen
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