Celgene: Can A Stock With A 45x P/E Still Be Cheap?

10/6/17

How can Celgene (CELG) stock have a GAAP trailing-twelve-month 45x P/E and yet be cheap?

Let's add the fact that year-to-date, shares appreciated over 26%. It doesn't matter. I contend the shares are still inexpensive.

At the time I wrote this article, CELG was trading at $146.

Valuation Matters

In order to be a successful, long-term investor, determining fair value estimates for your stocks is critical. It's nearly impossible to beat the market by consistently overpaying for the merchandise. A FVE is a fact-centered opinion about what a stock is worth at a point in time. The manic-depressive Mr. Market tends to over-and-undershoot fair value. Fair value estimates are not static. It's a dynamic measure that may fluctuate based upon company fundamentals. Earnings and cash flow estimates are prime movers. The principle behind equity FVEs rest upon a straightforward, underlying premise:

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