Netherlands-based molecular diagnostics and pharmaceutical research company Qiagen N.V. (QGEN) has been declining as a broader macroeconomic recovery drives investors toward turnaround stocks. After registering 17.7% gains over the past year, QGEN has declined 3.4% over the past six months, and 8.6% year-to-date. Also, given the company’s extensive operations in the United States, the weak dollar has caused its revenues and earnings to slump as well.

However, QGEN is an industry leader in the field of molecular diagnostics. Its QIAseq SARS-CoV2 Primer panel for sequencing potential mutation is in high demand worldwide to keep track of the effects of the new coronavirus variants. The company’s digital polymerase chain reaction (PCR) platform has proven to be a big hit in its market.

Here’s what we think what could shape QGEN’s performance in the near term:

Trading at a Discounted Valuation

In terms of non-GAAP forward p/e, QGEN is currently trading at 19.38x, which is 22.6% lower than the industry average  25.05x. The stock’s non-GAAP forward PEG ratio of 1.75 is 10.3% lower than the industry average of 1.95.

QGEN’s forward price/sales and price/cash flow multiples of 4.86 and 15.14, respectively, compare favorably with the respective industry averages.

Sound Financials and Growth History

With a  market capitalization value of $11 billion, QGEN has generated $1.87 billion in revenues in trailing 12-months. The company’s trailing 12-month gross profit of $1.30 billion translates to a gross profit margin of 69.29%, which is 24.5% higher than the industry average  55.65%.

QGEN’s trailing 12-month net income and ROE margins of 19.2% and 13.47%, respectively, compare favorably with the negative industry averages. Its trailing 12-month net operating cash flow of $457.81 million and cash and cash equivalents balance of $715.23 million reflect its liquidity strength. QGEN’s cash flow and holdings combined account for 75.2% of its long-term debt of $2.05 billion.

QGEN has an impressive growth history also, the company’s revenues have increased at a CAGR of 9.68% over the past three years, while its EBIT and net income have risen at CAGRs of 29.6% and 107.2%, respectively, over this period. Its EPS increased at a CAGR of 108% over the past three years.

Consensus Price Target Indicates Potential Upside

QGEN has gained more than 30% since hitting its 52-week low of $36.16 in March last year. Analysts expect QGEN to hit $57.59 soon, indicating a potential upside of 14.2%.

POWR Ratings Reflect Rosy Outlook

The POWR Ratings are also high on QGEN. It  has an Overall Rating of A, which translates to a Strong Buy. The POWR Ratings are calculated by considering 118 different factors with the weightings of each optimized to improve overall performance.

The stock has a B grade for Growth, Value, Stability and Quality. QGEN has a beta of 0.28, indicating relatively lower volatility, which is in sync with its Stability grade. Its impressive financial history and discounted valuation justifies the other grades.

Of the 488 stocks in the Biotech industry, QGEN is ranked #2. You can check out additional POWR Ratings for Momentum and Sentiment here.

Click here to view the top-rated stocks in the Biotech industry.

Bottom Line

Its existing product pipeline and innovative R&D plans should allow the company to multiply its revenues in the near term. Analysts expect the company’s EPS and revenues to increase 49.8% and 85.3%, respectively, year-over-year in the current quarter, ending March 2021. Considering the company’s growth potential, we think investors could  benefit significantly by betting on this undervalued stock.

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QGEN shares were trading at $48.39 per share on Monday afternoon, up $0.10 (+0.21%). Year-to-date, QGEN has declined -8.44%, versus a 5.38% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...

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