Have you been paying attention to shares of Ligand Pharmaceuticals (LGND - Free Report) ? Shares have been on the move with the stock up 15.7% over the past month. LGND hit a new 52-week high of $195.17 in the previous session. Ligand Pharmaceuticals has gained 42.4% since the start of the year compared to the -0.4% move for the Medical sector and the -6.5% year-to-date return for its peer group.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, having beaten the Zacks Consensus Estimate in each of the last four quarters. In its last earnings report on May 8, 2018, Ligand Pharmaceuticals reported EPS of $1.55 versus the Zacks Consensus Estimate of $1.28 while it beat the consensus revenue estimate by 73.65%.
For the current fiscal year, Ligand Pharmaceuticals is expected to post earnings of $4.33 per share on $194.3 million in revenues. This represents a 34.05% change in EPS on a 37.7% change in revenues. For the next fiscal year, the company is expected to earn $5.29 per share on $222.07 million in revenues. This represents a year-over-year change of 14.07% and 14.29%, respectively.
Ligand Pharmaceuticals may be at a 52-week high right now, but what might the future hold for LGND? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Ligand Pharmaceuticals has a Value Score of D. The stock's Growth and Momentum Scores are A and D, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 45X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 51.7X versus its peer group's average of 19.5X. Additionally, the stock has a PEG ratio of 1.8. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Ligand Pharmaceuticals currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 and Style Scores of A or B, it looks as if Ligand Pharmaceuticals passes the test. Thus, it seems as though LGND shares could have a bit more room to run in the near term.
How Does Ligand Pharmaceuticals Stack Up to the Competition?
Shares of Ligand Pharmaceuticals have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also looking good, including Genomic Health (GHDX - Free Report) , Integra LifeSciences Holdings (IART - Free Report) , and ANI Pharmaceuticals (ANIP - Free Report) , all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.
However, it is worth noting that the Zacks Industry Rank for this group is in the bottom half of the ranking, so it isn't all good news for Ligand Pharmaceuticals. Still, the fundamentals for LGND are promising, and it still has potential despite being at a 52-week high.