"Without question, now is an excellent time to be acquiring shares of Genentech (NYSE: DNA)," says biotech industry expert John McCamant.
In his The Medical Technology Stock Letter, the advisor explains, "The company is unquestionably the premier player in cancer drug development."
The advisor states, "Despite the fact that the company has consistently produced outstanding earnings and revenue growth, and is on track to continue to do so, the Street had become more and more negative on the company." He notes that this skepticism is largely because the expected growth rate in future years is not going to be as robust as it has been to this point.
For example, he points out that earnings grew by over 75% in 2006 over 2005. However, he adds, in 2007, they are expected to grow by only 30% (over last year).
McCamant states, "Yes, that's right. We said only 30%. Further, merely 20% growth (roughly) is expected next year over the current year. Common sense should tell everyone that as companies get bigger and bigger, the growth rate is going to slow down."
He continues, "This hasn't, however, prevented many investors from souring on the DNA story, which has led to the pressure we had been witnessing. In fact, we would note that in the aftermath of the recent correction in DNA's stock, combined with the company's still quite impressive financial performance, their price/earnings ratio has now dropped down to levels that it has never seen."
This, he notes, in and of itself provides reason enough for him to recommend the shares. Further, he says, "Most people have it wrong when it comes to sales of DNA's cancer drugs, and that the potential for expansion of their existing cancer franchises, most notably Avastin, is being significantly underestimated."
He states, "We believe additional value-creating events, including -- but certainly not limited to -- more positive data from studies testing DNA's already marketed drugs in the earlier stages of cancer, will help drive growth above and beyond what most investors are expecting."
Meanwhile, he explains, "DNA's management has always delivered to their shareholders. And, given the company's impressive track record, we have little reason to believe that this is going to change in the future."
Each day, Steven Halpern's TheStockAdvisors.com features the latest investment ideas and market commentary from the financial newsletter community.
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Reader Comments (Page 1 of 1)
7-16-2007 @ 11:50PM
Trent said...
DNA still trades on FDA approvals more so than earnings. Luckily it looks like there will be more of those coming.
http://stockmarketbeat.com/blog1/2007/07/12/dna-genentechs-approval-lull/