FundamentalsWritten by Ophir Gottlieb, 12-02-2015
This is an update to the post made on November 13th and addresses new information on the stock price, the addition of the stock to the S&P 500 index, institutional holdings, and new highs now broken in revenue per employee, book value and earnings margin.
We could make an argument that Illumina is the single best stock to own to gain exposure to the biotechnology sector and after an epic collapse from over $240 to $140 in stock price, the stock has rallied back hard, spurred by its entry into the S&P 500. Here's the rather spastic stock chart over the last year.
Furthering our prior research on ILMN, we note that fully 93% of the stock is held by institutions. And why? Because they know what the main stream media has yet to catch up on. In wonderfully written piece by Luke Timmerman from Forbes, he writes:
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That's high praise, and better yet, it's true. The stock drop has been attributed to a valuation call for the entire biotech sector and a less than stellar earnings release on October 25th, 2015 when the company missed revenue estimates for the second straight quarter and both Citigroup and JP Morgan lowered price targets. Of course, those cuts happened at essentially the low of the price drop. We can always count on Wall Street to be a rather bumbling group.
Furthering our prior research, the company's revenue per employee has been expanding and now sits at an all-time high of $503,000 per employee.
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The Marvel that is Illumina
In an article written by Trey Thoelcke we get this: "The driving thematic force behind Illumina is that it is the leader in genetic sequencing and array-based solutions and the company is leading in the race toward genetic analysis for personalized medicine."
In English, ILMN makes the tools that allow biotechs and pharmas to do their drug trials and get approvals. The company actually makes the machines that sequence genomes, so the company is the very backbone of all other biotech/pharmas hurrying to detect various illnesses or irregularities through DNA-based technology. It's almost impossible to get too excited about the firm's success so far and potential future. Of course, stock prices can get ahead of themselves, but the company itself is in fact a marvel.
Check out this all-time revenue chart rolled up into trailing-twelve-month (TTM) periods.
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That's actually a real chart, not some made up fantasy of expectations. The green bar represents an all-time high. The company has generated over $2.1 billion in revenue in the last year and has realized 23% growth year-over-year and an astonishing 59% over the last two-years.
For good measure, the company doesn't just produce revenue, it produces profits as well. Here's a history of the company's net income (TTM) (aka after tax profit) since 2008.
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That green bar again represents an all-time high. ILMN has grown net income by over 80% year-over-year and 335% over the last two-years.
Furthering our prior research again, we look first at earnings margin from continuing operations and note that it has tripled in a matter of three years.
And even more visuals to further our research. Book value per share is now at an all-time high.
New Products and Partnerhsips
In the October 25th earnings release the company updated new products and partnerships.
ILMN completed the acquisition of GenoLogics Life Science Software which was already been adopted by more than 120 genomic labs worldwide, and its Clarity LIMS software strengthens ILMN's industry leading portfolio of genetic analysis solutions. ILMN also focuses growth in reproductive and genetic health and oncology. The company has placed a lot of weight and had a lot of success with strategic partnerships including AstraZeneca, Janssen and Sanof. But perhaps its most exciting recent partnership is with Merck (MRK) to start developing an oncology diagnostic.
Here's a chart if ILMN's R&D expense for all-time -- this is the guts of the future.
Yet again, we see that green bar, which represents and all-time high. R&D is up 40% over the last two-years.
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With the addition of GenoLogics, ILMN has become even yet more powerful. In the age of the biotech boom, where companies like Gilead, Celgene, Biogen, Alexion, Jazz and so many others are changing the world with cures for horrible diseases and afflictions, ILMN stands in the center. If the biotech boom today is the the rail road boom during the industrial revolution and the biotechs are the rail road companies, then ILMN is the steel that lines the rail road tracks.
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Illumina announced its collaboration with Memorial Sloan Kettering Cancer Center to focus research on the biology of circulating tumor DNA. Further, the company announced collaborations with Burning Rock and Amoy Diagnostics to develop clinical applications in China.
Read that last sentence fragment again: "to develop clinical applications in China."
The company also discussed new products. The Motley Fool reported that several new products were launched, including TruSight Tumor 15, which is a panel designed to identify potential cancer-related genetic variations, and Infinium arrays that help analyze genetic variation in populations.
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Management took down full year forecasts to 18% revenue growth from 20%, but the company's CEO remains very positive. He said, "the fundamentals of our business remain strong, despite a 3% miss to revenue expectations."
But, only a few people caught one very important change to an insurer's policy change, and I must give credit to The Motley Fool for sharing it. Check this out:
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Illumina is breaking all-time highs in revenue, earnings and R&D. It is the very backbone of perhaps the fastest growing sector (biotech) in the world outside of "The Internet of Things" (IoT) segment of technology. While growth forecasts have been taken down a bit, let's not lose the forest for the trees, friends. This company can't help but grow at double digit rates and there appears to be no real limit to that growth in the foreseeable future.
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