Regeneron Pharmaceuticals, Inc. (NASDAQ: REGN) Recent Stock Performance Looks Decent – Could Strong Fundamentals Be The Reason?
Regeneron Pharmaceuticals (NASDAQ: REGN) stock has risen 8.5% in the past three months. Since the market typically pays for the long-term financial health of a business, we decided to study the fundamentals of the business to see if they could influence the market. In particular, we will pay particular attention to the ROE of Regeneron Pharmaceuticals today.
ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it has received from its shareholders. In simpler terms, it measures a company’s profitability relative to equity.
How is the ROE calculated?
the ROE formula is:
Return on equity = Net income (from continuing operations) ÷ Equity
So, based on the above formula, the ROE of Regeneron Pharmaceuticals is:
33% = 4.0 billion USD ÷ 12 billion USD (based on the last twelve months up to March 2021).
The “return” is the amount earned after tax over the past twelve months. One way to conceptualize this is that for every dollar of shareholder capital it has, the company has made a profit of $ 0.33.
What does ROE have to do with profit growth?
So far we’ve learned that ROE is a measure of a company’s profitability. We now need to assess how much profit the business is reinvesting or “withholding” for future growth, which then gives us an idea of the growth potential of the business. Assuming everything else is equal, companies that have both a higher return on equity and higher profit retention are generally those that have a higher growth rate compared to companies that do not. the same characteristics.
A side-by-side comparison of Regeneron Pharmaceuticals’ 33% profit growth and ROE
For starters, Regeneron Pharmaceuticals has a pretty high ROE, which is interesting. In addition, the company’s ROE is higher than the industry average by 18%, which is quite remarkable. Thus, the substantial net income growth of 31% observed by Regeneron Pharmaceuticals over the past five years is not too surprising.
Then, comparing with the growth in net income of the industry, we found that the growth of Regeneron Pharmaceuticals is quite high compared to the industry average growth of 22% during the same period, which is great to see.
NasdaqGS: REGN’s past earnings growth as of May 31, 2021
The basis for attaching value to a business is, to a large extent, related to the growth of its profits. What investors next need to determine is whether the expected earnings growth, or lack thereof, is already built into the share price. This then helps them determine whether the stock is set for a bright or gloomy future. Has the market taken into account REGN’s future outlook? You can find out in our latest intrinsic value infographic research report.
Is Regeneron Pharmaceuticals Using Its Profits Effectively?
Overall, we are very satisfied with the performance of Regeneron Pharmaceuticals. In particular, it is great to see that the company is investing heavily in its business and with a high rate of return, which has resulted in tremendous growth in its profits. That said, the latest forecast from industry analysts shows that the company’s earnings growth is expected to slow. To learn more about the company’s future earnings growth forecast, take a look at this free analyst forecast report for the company to learn more.
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