|Market Growth LT||A+|
|Market Growth ST||A+|
The Company's Growth Indicators are Very Strong Across the Board Sugesting Market Share Gains
Pharmacyclics, booked a total of $139.92 million in revenue during the 12 months ended last quarter, which represents a remarkable 1141.38% increase from the equivalent period ended two years ago, in which total revenue was $11.27 million. Such strong sales growth momentum seems to have carried into the company's latest quarterly report, in which total revenue of $57.96 million represented a 156556.76% increase from the year earlier period's $0.04 million. This kind of top line growth is typical of companies gaining market share and, if managed smartly, should produce strong profits in the next few quarters. Also based on its latest report, profits grew very strongly last quarter when compared to the year earlier period and when measuring full year results against those of three years ago. Pharmacyclics,'s Fourth quarter profit of $41.93 million reversed a $14.54 million (excluding extraordinary items) loss posted in the year earlier period, while based on 12-month trailing numbers it posted a profit of $68.45 million for the period ended December 31, 2012, also reversing negative results reported in the comparable period ended three years earlier, in which the company had lost $21.75 million. The company extended its ongoing margin expansion with a very impressive increase during its latest quarter in which its EBITDA, operating and net margins jumped an average 107.29% from the year earlier period.
Investors apparently anticipated the company's negative earnings surprise of its May 02, 2013 report, which came 329.41% below analysts' estimates, considering the stock actually rose 0.32% after the announcement. Given the positive reaction to the announcement, investors may expect this negative surprise to be only a blip in the company's positive earnings surprise record, having exceeded analysts' expectations by an average of 46.80% in the last six quarters.
|Price/Cash Flow Ratio||F|
Company's Shares Seem Fully Priced and Buying at this Level Would Be Highly Speculative
Pharmacyclics,'s stock is trading presently at 88.98 times trailing 12-month earnings per share, which represents a 1232.23% discount to the company's "optimum" P/E ratio of 15.00; this ratio is calculated by MarketGrader based on the company's two-year EPS growth rate, which in turn is computed by looking at the rolling 12-month periods ended in each quarter within the two years and measuring their growth. By this measure, Pharmacyclics,'s earnings per share have grown at an annualized rate of 0.00% in the last two years. ** The stock also trades at -169.83 times forward earnings estimates for the next four quarters, lower than its trailing P/E and the S&P 500 index's forward P/E of 15.20. By placing a lower multiple on the company's future earnings than it does on the market as a whole, investors may see the company as financially strong but with relatively poor growth prospects. This may offer a valuable opportunity for patient investors willing to wait for future earnings reports.
Pharmacyclics,'s market value is 24.01 times its tangible book value (which excludes intangible assets such as goodwill), a very rich multiple. Even when intangible assets--which make up only 0.00% of total stockholders' equity--are added back to total assets, the price to book ratio drops to 24.01, still a significant premium. The company generated $1.14 in cash flow per share over the last twelve months, which translates into a 74.28 price to cash flow ratio. Such a rich multiple suggests investors have very high hopes that the company's strong fundamental performance continues in the future. Its shares also trade at 41.97 times its trailing 12-month sales, a small 91.60% discount to the Biotechnology industry average price to sales ratio of 497.40. Finally, from a value perspective, we look at how much bigger the company's market capitalization is than its latest operating profits after subtracting taxes. Pharmacyclics, lost $14.56 million (even after adding back depreciation) in its latest quarter; comparing its $6.18 billion market cap to this number is not meaningful from a value perspective but the loss is meaningful in the context of our Profitability and Cash Flow indicators, which appear below.
|Return on Equity||A-|
|Quality of Revenues||F|
Company's Operations Are Very Profitable and Indicate a Solid Business Environment
Pharmacyclics, is a very profitable company with strong overall indicators in this section of our analysis. The company's different measures of return to shareholders and margins are typically above those of its peers. In the last four quarters Pharmacyclics, earned a profit of $68.45 million, equivalent to 48.92% of its sales in the period. The Biotechnology industry had an average operating margin of 13.97% in the period. The company's operating margin of 48.41% exceeded that average by 232.46%. Pharmacyclics,'s return on equity--an important measure used by MarketGrader to gauge management efficiency--is very strong, at 26.07% based on how much the company has earned in the last year. This represents an improvement from the year-earlier -44.89% return on equity, a very healthy sign of profitable growth.
In light of the company's strong performance its capital structure might be too conservative, with total debt being less than half its total equity. Its long term debt accounts for only 0.00% of total capital. Pharmacyclics,'s has staged a very favorable turnaround in its core operations, at least when measured by the company's EBITDA in the last twelve months. During this period the company earned $68.40 million in core earnings (income before deducting interest expense, income taxes owed, depreciation and amortization) in contrast to the $41.89 million it lost from its core operations in the twelve months ended a year earlier.
|Cash Flow Growth||F|
|Debt/Cash Flow Ratio||A+|
|Interest Cov. Capacity||A+|
Company's Cash Flow Is Very Well Managed as Our Analysis Reflects a Very Healthy Operation
Pharmacyclics,'s quarterly cash flow continued to slide in its latest reported period to $-12.41 million, 11.08% worse than the year earlier negative cash flow of $-11.17 million in the comparable quarter. This marks a very sharp and sudden reversal in the company's operating environment considering that it was still growing up to most recently, based on twelve month trailing cash flow of $-12.41 million compared to $-11.17 million in the year earlier period, a 417.32% increase. The company clearly has very strong liquidity having no debt to finance, $317.11 million in cash on hand as of last quarter and a business that generated $105.25 million in earnings before interest, taxes, depreciation and amortization in the same period. This affords it significant flexibility to take on debt if it wanted to pursue new growth opportunities such as an acquisition. The company had $317.11 million in cash on hand last quarter compared to $105.25 million a year earlier, a 201.30% increase. It continues to have no debt.
Our Economic Value indicator measures the company's ability to generate a true economic profit by taking into account not only the costs of running the business but also the cost of capital. In Pharmacyclics,'s case, since the company has no debt, we only look at the cost of equity, which is to say the opportunity cost to an investor of having his capital tied up in the company's shares instead of some other investment. Based on its 12-month trailing operating income, Pharmacyclics, generated a 51.27% return on $262.53 million of invested capital. Since it has no debt this simply includes all forms of equity. Its after tax cost of equity during the last year was 11.81%, which, when deducted from its return on investment results in an economic value added, or EVA, of 39.45%. This is a remarkable return to its shareholders, more than justifying their investment in Pharmacyclics,'s shares. Pharmacyclics, does not pay a dividend and hasn't done so within at least the last five years.