The company
QCOR is a biopharmaceutical company that manufactures drugs against autoimmune diseases. The company's profits are generated mainly by two areas: treatment of acute conditions of adult multiple sclerosis and treatment of infantile spasms afflicting children under 2. HP Acthar is its main product.
Investment idea
QCOR has rather strong fundamentals. Its strengths are obvious in many respects. These mainly include high earnings growth rates, an impressive EPS growth, a steady growth in net profits, sizeable financial positions. The company successfully survived the recession. Since 2009 it has been rapidly developing and outdid the sector by 5.5% in 2011 in terms of revenues growth, with the net profit margin of 38.20%. QCOR has no debt. The company's solvency figures are high. We believe the company will maintain its growth rates and will face no financial difficulties in the near future. This is why we recommend creating a medium-term position buying from the fundamental level at 35 dollars. The analytical stop loss should be at 33. The targeted price growth is 52.57 with a growth potential of 50%. R/R = 1 to 8.7.
Analysis of the sector
Most companies of the sector are mature and characterized by high margins and highly paying dividends. Major players of the sector: Pfizer (PFE), Merck Serono, Bristol-Myers Squibb (BMY), Abbott Laboratories (ABT) and Eli Lilly (LLY).
The sector faces rigid environmental standards for drugs production. It also depends on federal subsidies and a variety of governmental programs. The government's estimates suggest the drugs market can reach a turnover of 497 bn. dollars by 2016 as a result of the quickly ageing population, inflation and growth in the number of expensive drugs.
Recommended trading plan
Entry $35; Target $52.57; Stop under $33 upon stabilization.
Short-term fundamental analysis
The company's earnings and sales demonstrate confident growth. Its figures rapidly recovered since Q1 2010. Our estimates suggest that the company's Q4 2011 earnings will be $0.38 per share, and sales of 69 mln. dollars. EPS growth will be 249% and sales – 134% as compared to Q4 2010. We estimate that the company will be building up sales and EPS the next four quarters.
Long-term fundamental analysis
Annual earnings and sales show confident recovery since early 2009. The company's business was not especially affected by the recession. Our estimates suggest that the company's earnings will be $1.15 per share, and sales of 210 mln. dollars by end of 2011. EPS growth will be 110% and sales – 82% as compared to the previous year. We expect the company's sales and revenues to grow in the next 2 years.
Fundamental factors
The company's growing earnings and sales outdo its competitors' growth rates in the sector. Currently, the immediate liquidity ratio is 4.15. This suggests the ability to cover any short-term cash needs. QCOR managed to boost liquidity compared to same quarter last year. Regardless the high liquidity available from the start, the company demonstrates an increase in cash flows. Over the same period its equity (own capital) added 55.52%. Overall, the fundamental analysis of financial figures suggests that the company will not face any financial difficulties in the near future.
Analysis of short-term expectations
EPS outlook trend
Analysts consistently upgraded their expectations of the company's future revenues in the past three months. 1 week ago estimates were upgraded for the last time.
Number of EPS revisions
Currently 10 analysts deal with the company. 2 of them upgraded their expectations in the last month, and one downgraded.
EPS estimate revision potential
Analysts regularly increase the target share price. The average target share price is currently at 52.57 or 44% above the current price level.
Financial statements
